The Finnish company Nokia and the German Siemens announced their decision to merge their telecommunications activities through the creation of a joint venture at 50% each, that will create a global company with estimated revenue in € 15.8 billion. The new company will be called Nokia Siemens Networks and it is estimated that, until 2010, the synergy will allow annual savings around the € 1.5 billion. The new company’s objective is to have a relevant role in the development of fixed and mobile systems convergence, as well as to achieve a good complement between both companies’ bases.

Nokia Siemens Network will be under the control of Nokia’s head, Olli Pekka Kallusvuo, while Simon Beresford Wylie will serve as executive director, who currently is Nokia’s networks executive vice-president and director. Peter Schoenhofer was appointed as financial director, who, so far, has been serving as member of Siemens Austria’s managing board.

The new company will start its activity as work strength of 60,000 people and it will become the second greatest mobile infrastructure of the world, the third as regards fixed infrastructure and the third in telecommunications market in all. It will have its headquarters in Helsinki, although it will also have a strong presence in Munich, where it will install its five divisions. The transaction will be completed before January 1, 2007 and it will be depending on the regulating authorities’ approval.

Olli Pekka Kallasvuo himself stated that “the communications industry is in full convergence process and the strong and independent Nokia Siemens Networks will be in ideal position to help customers reduce costs and improve incomes”. He added that “they thought that the alliance with Siemens is the most effective way to create a wide products portfolio, necessary to compete at global level and create value for the shareholders”.

For several months, there was being heard a rumor in the sector about Siemens’ decision to get rid of its telecommunications sector, and in more that one opportunity Motorola was mentioned as one of the companies to be in charge of those assets since they were an ideal complement for their mobile operations.

Siemens has been registering constant drawbacks in the telecommunications area, which forced it to sell, in 2005, its cellular business to the Taiwanese BenQ. Some months ago, a reorganization was announced in that business area, and signs were given to the market about the intention to look a way of selling or association since the company’s management, in charge of Klaus Klenfield, was not willing to keep on putting up with losses it has been accumulating lately in that sector. Moreover, Nokia has been registering drawbacks in the fixed telephony sector and it was quite difficult for it to compete in the mobile networks sector.