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Nokia and Siemens to merge some operations

Attempt to fight off Chinese competition

Nokia and Siemens will merge their telecoms infrastructure units to form Nokia Siemens Networks, a joint venture with estimated annual revenues of €15.8bn (about £10.8bn) for 2005, the two companies announced today.

Nokia is contributing its Networks Business Group, while Siemens will contribute its carrier-related operations for fixed and mobile networks, the companies said. Nokia Siemens Networks will focus on manufacturing products for fixed and mobile networks.

The deal, expected to close at the end of the year, will make the new entity the third-largest telecommunications infrastructure manufacturer, the companies said. This will place it after Telefonaktiebolaget LM Ericsson and the merged units of Lucent Technologies and Alcatel, which announced their merger earlier this year.

The companies will each hold a 50 percent stake in the new venture, which will be based near Helsinki. Nokia's executive vice-president and general manager of networks, Simon Beresford-Wylie, will become the new company's CEO.

The merger will save the two companies €1.5bn (£1bn) per year, the companies estimated. Much of this will come from a 10 to 15 percent reduction in headcount from 60,000, meaning cuts of 6,000 to 7,500 jobs in the first four years following the merger.

Falling prices for telecoms infrastructure have put pressure on the sector, leading first to the merger of Lucent and Alcatel in early April. Low-cost competitors such as China's Huawei Technologies are producing similar gear at lower prices, and also making inroads into markets such as Eastern Europe and Africa.

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