A rival to the Lucent-Alcatel combination was created last week when comms vendors Nokia and Siemens announced a deal to bring together their fixed-line phone and mobile businesses in a joint venture called Nokia Siemens Networks (NSN), which analysts value at around £17bn.

Some analysts predicted the deal could lead to cheaper business comms systems, due to competition between NSN and its rivals Alcatel-Lucent and Ericsson, which recently acquired Marconi. Warren Williams of research firm InfoTech said, “I expect that as Nokia-Siemens and Alcatel-Lucent face off in the marketplace, prices will be driven lower, and other mobile end-point manufacturers will respond with rapid product improvements that will provide a range of choices for service providers. Possibly more than anything else, the Nokia-Siemens merger may be a harbinger that the fixed-mobile convergence market is about to accelerate.”

NSN will realise efficiencies by removing duplication of research and development, but there will also be job cuts of up to 9,000 out of the current 60,000-strong workforce.

Nokia’s communications vice-president, Arja Suominen, said, “Scale is very important in this industry and because we’re in an era where new convergence systems are being brought forward rapidly, you need muscle to invest in R&D for the future. We’ll have an even stronger and broader product portfolio to offer to our customers. If you look at our customer base, there’s surprisingly little overlap.”

However, Paul MacGregor, managing director for project management consultancy PIPC, said, “This will be an expensive and risky [venture] and tough for management to get real value out of the business.”

Nokia and Siemens each own 50 percent of NSN. It will combine Nokia’s Networks Business Group and Siemens’ carrier-related operations for fixed and mobile networks. Nokia chief executive Olli-Pekka Kallasvuo will be chairman and executive vice-president. Nokia networks general manager Simon Beresford-Wylie will be chief executive of NSN, which will be headquarted in Helsinki. The deal is due to be completed by 1 January 2007.