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Commission green lights Nokia-Siemens equipment merger

'Consumers will still have choice'

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The European Commission has given the green light to the proposed merger of Nokia and Siemens' network equipment business. The commission said the €25bn deal would not adversely affect the competitive landscape.

The deal creates a joint venture company, Nokia Siemens Networks, which will be equally held by Nokia and Siemens. It merges the network equipment businesses of both firms.

The commission has conducted a market investigation since the deal was announced in June and has concluded that competition in the sector is strong enough to cope with such a powerful new player. The combined company will rank third in its market.

"The main competitive impact of the proposed transaction would be in the mobile network equipment sector, since Nokia has few activities in fixed-line telecommunications," a commission statement said. "The commission's market investigation revealed that, despite the considerable market shares the merged entity would have in the mobile network equipment sector, the market structure would remain competitive."

The commission concluded that customers of the firms would still have a choice. "A sufficient number of credible competitors would remain in the market, inter alia market leader Ericsson and Alcatel-Lucent. Customers, mostly network operators, would still have alternative suppliers."

Though it involves assets of around €25bn, the transaction will not involve any cash payments. Nokia and Siemens will equally own the company, and it will have a Nokia executive as chief executive and a Siemens executive as chief financial officer.

Nokia's network equipment business makes base stations and switching equipment for the routing of mobile phone calls. The Siemens equipment business is thought to involve equipment more concerned with the routing of fixed line traffic, including voice calls and internet traffic, around networks.

It is thought that up to 9,000 jobs could be lost as part of the deal because the companies plan to share research and development tasks. The combined company expects to make cost savings through the deal of around €1.5bn a year by 2010 and to have revenues this year of just under €16bn.

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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