|Victoria Stanley |||Nov 20, 2015 09:50 AM EST|
(Photo : Bloomberg/ Getty images News) Rajeev Suri, chief executive officer of Nokia, says the aqcuisition of Alcatel Lucent will increase the company's 5G firepower
Nokia's takeover of rival network gear maker Alcatel-Lucent will give it a greater scope to invest in new and advanced technologies like 5G mobile equipment while cutting costs, its chief executive said on Wednesday.
Rajeev Suri, Nokia's chief executive, told Reuters in an interview that the Finnish company was making rapid progress towards the acquisition, first valued at 15.6 billion euro ($16.62 billion).
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According to Reuters, the deal coincides with a great new industry investment cycle set to kick off next year to develop the next generation of 5G networks expected to be deployed around 2020.
Alcatel-Lucent, a French-American company, spends around 4.7 billion euros annually on development and research, while Nokia spends less than half that. "We have more scale to invest in 5G than we would had alone," Suri said.
The projected data demands of connected cars and industry will require 5G to handle them. It will also make towns more secure and enable new wearable communications devices. Currently, 4G networks handle mostly phone and computer traffic.
Suri said that next year is crucial in the development of Nokia's network capacity, thus the timing of the acquisition. The two separate companies had two different portfolios in the 4G era, but with the merger, it will be able to invest in and market a single 5G product line, Barron's reported.
Suri was speaking during the first day of Nokia's public exchange offer to Alcatel-Lucent investors, for which the company needs more than 50 percent of shareholders to accept by the closing date of December 23.
Nokia shareholders cleared the way for the deal to be completed some time in the first quarter after holding a separate vote in December 2014. Suri emphasized that mentally, the company want to hit the ground running. For them, the deal closes when they get more than 50% of Alcatel-Lucent shareholders accepting the deal.
The earliest the deal could close would be some time after the first week of 2016 as per the settlement of the offer and holidays.
Alcatel-Lucent investors including Odey Asset Management had called for better terms and conditions after its results earlier this year were reportedly better than Nokia's.
Few expect this to succeed as the deal is formulated as a tender offer, requiring only a majority of Alcatel shareholders to be willing to sell. When asked whether other major shareholders were ready to back the deal, Suri declined to comment.
Last month, the company brought forward its 900 million euro cost-saving target for the deal by 2018. It also named the combined company's top 130 executives last week. Suri's plan by the time the deal closes is to have at least 10,000 managers chosen from the two companies.
His confidence is supported by the rapid regulatory acceptance, greater clarity on acquisition plans, and a firm financial performance in the past two quarters. Last month, Nokia announced plans to return to shareholders $4.4 billion in coming years through share buybacks and dividends.
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