Nokia and Alcatel-Lucent: Merging to succeed

Alcatel-Lucent CEO talked with CommsMEA about the deal during a media roundtable
Michel Combes, CEO at Alcatel Lucent.
Michel Combes, CEO at Alcatel Lucent.

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With stamina and a sincere smile, Michel Combes, CEO at Alcatel Lucent, arrived to the meeting room in Dubai. After a long day full of meetings in the United Arab Emirates, Combes still had time and strength to talk with some journalists about the merger that the French company and Nokia announced in April.

“It is the perfect time to do it. Both companies are prepared to enter this movement and we have already started to reshape the industry. You can think of Ericsson or Cisco,” he said about the merger and the shift that the telecoms sector is witnessing.

In April, Nokia presented its plans to acquire rival telecoms vendor Alcatel-Lucent in a deal worth $16.6 billion. The proposed transaction is expected to close in the first half of 2016 and has been approved by both boards of directors.

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Combes explained that he was the one who sat down with Nokia and initiate the negotiations. “I was the one who started this conversation with Nokia, I started it last summer. In April 2014, they [Nokia] announced their new strategy and said that it would be based around telecoms infrastructure. They also appointed Rajeev Suri as the CEO, because he was the CEO of NSN, so it made sense because it was the biggest asset for the company.”

The new company will be called Nokia Corporation, with headquarters in Finland and a strong presence in France. Combes already announced that he will not be part of the new organisation.

“The chairman, the CEO and the CFO need to be from Nokia. I have always said that in order to achieve a successful merger, we need to avoid any type of conflict. If you want this, it is better to have the chairman, the CEO and the CFO from the same company. Then they will leverage the assets of both companies to create a new management team,” Combes said.

Risto Siilasmaa is planned to serve as chairman, and Rajeev Suri as chief executive officer. Timo Ihamuotila is the executive vice president and group CFO at Nokia and he will remain in this position, according to Combes. The combined company’s board of directors is planned to have nine or ten members, including three members from Alcatel-Lucent, one of whom would serve as Vice Chairman.

“I will not be part of it [new company], but it doesn’t mean that I am not passionate about it. I think that it is going to be super successful,” he added. Combes did not explained what he will do next when asked about it.

Alcatel-Lucent shareholders would own 33.5% of the fully diluted share capital of the combined company, and Nokia shareholders would own 66.5%, assuming full acceptance of the public exchange offer.

The United States Department of Justice permitted the transaction to proceed. According to Nokia, the parties continue to make good progress with the regulatory approval processes in the remaining relevant jurisdictions, with the parties having already obtained antitrust clearances in Brazil and Serbia. “Both companies will continue to cooperate with the remaining authorities to close their reviews as quickly as possible,” the Finnish vendor said.

The transaction remains subject to approval by Nokia shareholders, Nokia holding over 50.00% of the share capital of Alcatel-Lucent on a fully diluted basis upon completion of the public exchange offer, receipt of other regulatory approvals and other customary conditions.

“It is not a merge of equals because there is a bigger company and another one smaller. I believe that the merge will succeed,” he said.

Nokia Corporation will retain Alcatel-Lucent’s Bell Labs research and development brand and Nokia’s FutureWorks, as well as Nokia Technologies, which will stay as a separate entity with a clear focus on licensing and the incubation of new technologies.

Jobs cuts will be announced post-closing

Combes said that the company will present the number of job cuts post-closing. “We are not going to debate about that before closing, we have detailed work to be done and see how the synergies will work. Of course there is going to be a little bit of overlap but this is an offensive merge, it is not a defensive. But eve in offensive mergers you have this overlap.”

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He explained that the company will follow a process and it will talk with its internal unions first. “We have started speaking with the unions, I met with the unions the day after the announcement, our global union leaders, meaning the global company with the unions in the different countries,” he said.

Alcatel-Lucent and Nokia also talked about a new jobs related to the innovation vertical of the new company. “Obviously we are moving very fast in new territories, we are talking about new software, so this will create new opportunities to people in order to bring those new skills and capabilities to the company and satisfy our customers. We will look at that [job creation] in the new course,” he added.

“In our innovations services we will increase the number of people. We need to step up in 5G, there is a decision already taken to have some additional people there,” he highlighted.

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