NewNokia all-share deal values rival Alcatel-Lucent at 15.6 billion euros

Nokia is to buy Alcatel-Lucent in an all-share deal that values its smaller French rival at €15.6 billion (HK$128.2 billion), building up its telecommunications equipment business to compete with market leader Ericsson.

Nokia's takeover of Alcatel-Lucent will redefine a telecoms equipment sector suffering weak growth prospects and pressure from low-cost Chinese players Huawei and ZTE.

The combined company will have about 114,000 employees and combined sales of about €26 billion. In mobile equipment it will rank a strong second, with a global market share of 35 per cent, behind Sweden's Ericsson with 40 per cent and ahead of Huawei's 20 per cent, according to Bernstein Research.

The Finnish company will give Alcatel-Lucent shareholders 0.55 share in the combined company for each of their old shares, resulting in 33.5 per cent of the entity being in Alcatel's hands and Nokia having the remaining 66.5 per cent if the tender offer is fully taken up.

Nokia initially approached Alcatel-Lucent about buying only the wireless business but was rebuffed, leading to the broader deal, Alcatel boss Michel Combes said.

Nokia shares rose 3 per cent at the opening on Wednesday, while Alcatel-Lucent fell 11 per cent, reversing trends on Tuesday when the talks were first acknowledged by the companies.