Conditional approval for Nokia-Alcatel deal in China

By Money Times

Oct 22, 2015 12:57 AM EDT

The Finnish telecom network equipment maker Nokia's acquisition plan for French rival Alcatel-Lucent has received the conditional clearance from the Chinese government. The China's Ministry of Commerce has approved it with some conditions on the Euro15.6billion ($17.6bn) deal's antitrust process.

Nokia has agreed to meet certain terms by 10 December. Nokia has to ensure that market competition wouldn't be impacted with the takeover, which is expected to be completed in the first half of 2016. 

Nokia has agreed to adhere certain rules and regulations pertaining to the wireless telecommunication standards and patent licensing usage in China. Nokia has to ensure that it meets the entire criterion as per the Chinese government's norms by December.  

Nokia in August decided to float a joint venture (JV) called Nokia Shanghai Bell in association with state-owned Huaxin hoping for speedy approval for the Alcatel-Lucent acquisition and held series of discussions with the Chinese government. However, the French government has to approve the Nokia and Alcatel deal. 

Rajeev Suri, Chief Executive Officer of Nokia, said: "We look forward to maintaining our deep commitment to China and playing a key role in the country's shift towards an innovation-driven economy."

With the latest conditional approval from the Chinese government's Commerce Ministry, Nokia has crossed another important milestone in its takeover journey. Nokia has already received approvals from Europe and the US and other markets and China's approval is the last regulatory hurdle for the major acquisition.

After the proposed acquisition, Nokia-Alcatel will emerge as the second-largest network equipment vendor after Ericsson and followed by world's third largest Huawei. The takeover will help the combined entity compete with Ericsson in addition to result in cost control. The acquisition deal would be implemented in all cash deal. 

The shareholders of Alcatel-Lucent will get 0.55 shares in the combined entity. After the acquisition, Alcatel will have 66.5 percent stake in the combined organization and Nokia will have rest of 66.5 percent. Sweden-based Ericsson has 40 percent market share in the global wireless market and China's Huawei has 20 percent while the combined entity will have 35 percent market share.

The Commerce Ministry has expressed concerns over the concentration of standard-essential patents (SEPs) over 2G, 3G and 4G in Nokia's business after the acquisition of Alcatel is over. According to non-discriminatory (FRAND) terms, patent holders are expected to license SEPs on fair norms. However, the Chinese wireless network equipment and handset makers don't have the patents required to effectively negotiate cross-licensing deals with Nokia.

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