Nokia's $16.6 billion bid to buy Alcatel-Lucent got a significant boost when European Union antitrust regulators gave their approval to the deal.
The European Commission ruled July 24 that while both vendors sell equipment and services to telecommunications companies, the acquisition doesn't raise antitrust concerns because Nokia and Alcatel-Lucent are not close competitors and there are other strong companies—such as Ericsson, Huawei Technologies, ZTE and Samsung—in the global market.
The OK from the European Union (EU) is an important step forward for the deal, which was announced in April after more than two years of speculation and on-again, off-again talks. It also comes a month after the U.S. Department of Justice granted the networking vendors early termination of the United States' antitrust waiting period, which gave Nokia the go-ahead to proceed with the deal.
Nokia also has received antitrust clearance from an array of other countries, including Brazil, Canada, Russia, Serbia and Colombia. Nokia shareholders also have to approve the deal, which is expected to close in the first half of 2016.
The acquisition will bring together two companies that have been in transition, from Nokia shedding its networking partnership with Siemens to Alcatel-Lucent going through yet another restructuring since the merger of Alcatel and Lucent in 2006, this one called the Shift Plan. It also will create a new company that in 2014 had a combined $27.5 billion in sales and $2.45 billion in profits, more than $5 billion in R&D (including funding for Bell Labs and Nokia's FutureWorks program) and net cash of almost $7.9 billion. Nokia officials said the company's addressable market will increase by 50 percent, to more than $138 billion.
The company will present a larger competitor to the likes of Ericsson and Huawei, the giant Chinese tech vendor that is making a strong play in the European networking market.
"We have hugely complementary technologies and the comprehensive portfolio necessary to enable the Internet of things and transition to the cloud," Nokia President and CEO Rajeev Suri—who will be the new company's CEO—said in a statement after the deal was announced. "We will have a strong presence in every part of the world, including leading positions in the United States and China. Together, we expect to have the scale to lead in every area in which we choose to compete, drive profitable growth, meet the needs of global customers, develop new technologies, build on our successful intellectual property licensing and create value for our shareholders."
The European Commission (EC) said that it had looked at the impact the deal would have on a number of markets related to mobile network equipment, including radio access network gear and core network systems. While the merged company will have shares of 30 percent or more of the markets looked at, there were few overlaps between Nokia and Alcatel-Lucent.
"Indeed, Nokia has a strong presence in the European Economic Area, where Alcatel-Lucent is a small player, and conversely Alcatel-Lucent has a strong presence in North America, where Nokia's activities are rather limited," EC regulators said in a statement.
Along with noting the strong competitors in the worldwide market, European regulators also found that the "transaction would make it harder for new or small players to enter and expand in the market."