NEW DELHI: In a major announcement, Nokia and Alcatel-Lucent have decided to merge capabilities for enabling the next wave of technological change including the Internet and transition to the cloud. Nokia coughed up EUR 15.6 billion ($16.6 billion) to acquire Alcatel-Lucent.

The new company, to be known as Nokia Corporation, will have more than 40,000 R&D employees.

Alcatel-Lucent shareholders will own 33.5 per cent while Nokia shareholders would own 66.5 per cent in the new corporation.

Risto Siilasmaa will be chairman and Rajeev Suri will be CEO of the new corporation. It will be headquartered in Finland.

The combined company expects to target approximately EUR 900 million of operating cost synergies. The proposed company would have had net sales of EUR 25.9 billion on a FY 2014 combined basis, a non-IFRS operating profit of EUR 2.3 billion, a reported operating profit of EUR 0.3 billion, and R&D investments of approximately EUR 4.7 billion.

However, Alcatel-Lucent’s Bell Labs and Nokia’s FutureWorks, as well as Nokia Technologies, which will stay as a separate entity with clear focus on licensing and the incubation of new technologies.

The new company will be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging.

Alcatel-Lucent and Nokia have strength in the United States, China, Europe and Asia-Pacific. They will also bring together the best of fixed and mobile broadband, IP routing, core networks, cloud applications and services.

Consumers are looking to access data, voice and video across networks of all kinds. In this environment technology that used to operate independently now needs to work well together. Nokia and Alcatel-Lucent are uniquely suited to helping telecom operators, internet players and large enterprises address this challenge.

The combined company’s Board of Directors will have nine or ten members, including three members from Alcatel-Lucent, one of whom would serve as vice chairman.

The combined company would target approximately EUR 900 million of operating cost synergies to be achieved on a full year basis in 2019, if the deal is finalized by the middle of 2016.

The combined company would target approximately EUR 200 million of reductions in interest expenses to be achieved on a full year basis in 2017.

Suri said, “We have hugely complementary technologies and the comprehensive portfolio necessary to enable the internet of things and transition to the cloud.  We will have a strong presence in every part of the world, including leading positions in the United States and China.”

Alcatel-Lucent CEO Michel Combes added, “A combination of Nokia and Alcatel-Lucent will offer a unique opportunity to create a European champion and global leader in ultra-broadband, IP networking and cloud applications.”