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Nokia, Siemens announce $31.5 billion phone equipment deal
Posted: 19-Jun-2006 [Source: Nokia]

[Nokia and Siemens announce 50-50 joint venture combining their phone equipment businesses. The new company to be run by Nokia exec Simon Beresford-Wylie.]

Nokia and Siemens today announced that they intend to merge the Networks Business Group of Nokia and the carrier-related operations of Siemens into a new company, to be called Nokia Siemens Networks. The 50-50 joint venture will create a global leader with strong positions in important growth segments of fixed and mobile network infrastructure and services.

The combined company is positioned to lead the development and implementation of revenue-generating and cost-saving products and services via its scale and global reach. Nokia Siemens Networks will have one of the world's best research and development teams with the ability to invest in next generation fixed and mobile product platforms and services. The new company will have a world-class fixed-mobile convergence capability, a complementary global base of customers, a deep presence in both developed and emerging markets, and one of the industry's largest and most experienced service organizations.

"We believe the partnership with Siemens is the most effective way to build the scale and broad product portfolio necessary to compete globally and create value for shareholders," said Olli-Pekka Kallasvuo, CEO of Nokia. "The communications industry is converging, and a strong and independent Nokia Siemens Networks will be ideally positioned to help customers lower costs and grow revenue while managing the challenges of converging technology." Olli-Pekka Kallasvuo will serve as chairman of Nokia Siemens Networks.

"This joint venture is an important step to strengthen our position in the market sustainably and to enable us to offer the best state of the art converged technologies and services to our customers," said Klaus Kleinfeld, CEO of Siemens. "This combination creates a leading industry player with immediate strength, excellent potential for growth and well-positioned to improve future profitability."

Strong player with scale and powerful convergence portfolio

Based on the 2005 calendar year, the combined company had EUR 15.8 billion in pro forma annual revenues and is expected to start operations with 60,000 employees. Based on current market share data, it will be the second largest company in mobile infrastructure, second in services, third in fixed infrastructure, and the third largest in the overall telecommunications infrastructure market.

Nokia Siemens Networks will be able to offer its operator customers a comprehensive portfolio of fixed and mobile network products supported by a full range of professional services. The company's portfolio will include Next Generation Network convergence products like IMS, 2G GSM/EDGE access, 3G WCDMA/HSDPA access, extensive mobile core, fixed broadband, transport, IPTV, LTE, WiMAX and low-cost mobile voice products tailored for emerging market operators.

Extensive synergy benefits

The estimated cost synergies of EUR 1.5 billion annually by 2010 are expected to come primarily from the elimination of overlapping functions, consolidation and better utilization of sales and marketing organizations, reduction of overhead costs, sourcing benefits, and greater efficiencies in R&D.

A substantial portion of these synergies is expected to be realized in the first two years. These changes are expected to result in a headcount adjustment over the next four years in the range of ten to fifteen percent from the initial combined base of approximately 60,000. Detailed headcount reduction assessments will be made as part of the integration planning process and subject to required consultation with employee representatives.

Both Nokia and Siemens expect the impact of the partnership on their respective EPS, on a pro forma basis excluding the restructuring charges, to be accretive by the end of 2007, assuming a closing by January 1, 2007.

Global company and leadership

Nokia Siemens Networks will have its operational headquarters in the Helsinki, Finland metropolitan area, and have strong regional headquarters in Munich, Germany, where three of the future five divisions of the new company will be based.

Simon Beresford-Wylie, currently Executive Vice President and General Manager of Networks at Nokia, will assume the position of chief executive officer immediately upon the closing of the merger. "Nokia Siemens Networks brings the two finest teams in the communications industry together at an unprecedented time of industry change," said Simon Beresford-Wylie. "I know the power of the Nokia team and have a deep appreciation for the quality and spirit of the people of Siemens. Together, the collective Nokia and Siemens teams will be a powerful force in the industry as we pursue our future goals of providing unequaled customer satisfaction and of becoming the undisputed industry champion." In addition to Simon Beresford-Wylie, Peter Schoenhofer will assume the position of CFO. Schoenhofer is currently a member of the executive board of Siemens AG Austria.

The transaction closing is expected to take place before January 1, 2007 and is subject to customary regulatory approvals, the completion of standard closing conditions, and the agreement of a number of detailed implementation steps. After closing, the financial results of Nokia Siemens Networks will be consolidated by Nokia and accounted for at equity by Siemens.

Today's press conference information

Nokia and Siemens will hold a press conference today, Monday, June 19, 2006 at 11:00 a.m. Central European Summer Time at the Hotel Intercontinental, Wilhelm-Leuschner Strasse 43, 60329 Frankfurt am Main. The press conference will be webcast at www.nokia.com/press/pressconference19062006 and www.siemens.com/press.

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