Nokia and Siemens; The Next Big Merger

Nokia and Siemens AG have planned to combine their telephone equipment units in a deal which is valued at roughly 25 billion euros ($ 31.6 billion).

The telecommunication network equipment firms will be formally announcing the merger today.

The merger has been approved by the boards of both companies. It is being expected that this merger will set a new global round of consolidation and price wars as the telecommunication industry continues a transformation since the last decade.

With the merger, world`s third-largest network equipment company would be created, after Ericsson and the new entity formed by the recently announced merger of Lucent and Alcatel.

The new company resulting from the Nokia-Siemens deal is being structured as something of a joint venture.

Nokia will be controlling a majority of board seats of the new company which would be based in Finland and will not traded separately.

However, the ownership of the new company will be split evenly between Nokia and Siemens and has been reported to be headed by a Nokia executive, Simon Beresford-Wylie.

This merger will allow both companies to reduce redundant research and development spending which would save about 1.25 billion euros ($ 1.58 billion) annually.

Nokia's cell phone business will, however, remain unaffected by the deal but the combination can be used to provide network equipment to carriers, including advanced features for its phones.