The repurchase of Alcatel-Lucent by its competitor Nokia could avoid the pitfalls encountered by previous mergers in the telecommunications equipment through the deep transformation occurred over the past decade in how these materials are developed and introduced.
The head and legs telecom networks reside today in the software that are programmable and flexible rather than in dedicated infrastructure. The products are more flexible with open interfaces that allow equipment from different manufacturers to interact.
This should enable faster and less costly integration of product lines of the Finnish and the Franco-American, say analysts and industry executives, and could contribute to what Nokia succeed where previous operations failed.
900 million of synergies
The group pledged to release 900 million euros in synergies by 2019 through the acquisition of Alcatel-Lucent that it intends to complete the first half of 2016. Analysts believe that most of the cost savings will come from mobile, where Nokia products in 4G replace those futures Alcatel, reducing the high budgets for R & amp;. D and redeploy engineering teams
But the history of mergers in the sector is inglorious like the reconciliations between Alcatel and Lucent and Nokia and Siemens in 2006. The cost reductions promised in these transactions were eventually given back to consumers through reductions Price as Ericsson and Huawei competitors are on the offensive while these groups were busy with the implementation of the merger.
PRESERVE MAJOR CLIENTS
The integration of product portfolios has also proved long and costly because of the need to continue to provide support for equipment installed at major telecom operators. A mobile site is still installed at Verizon for example in service for ten years and the equipment is committed to mobilizing a team of engineers on what is called a product roadmap in order to continue to improve with time.
This time, a greater portion of these improvements can be implemented via software updates, which should facilitate the sharing of product lines, has promised investors the number one Nokia Rajeev Suri after the announcement of the transaction. “The open interfaces, high-speed broadband and cloud now allow faster and more effective integration ,” he said.
Succeeding this pooling is important not only to reduce costs but not to antagonize major clients such as Verizon and AT & T, the two major US telecom operators using Alcatel technology in 4G. Some analysts and investors believe that the bet this time is likely to succeed while others remain skeptical.
“What need between four to five years for Alcatel-Lucent and Nokia Siemens in the product roadmaps should this time take two or three years” said Pierre Ferragu, analyst at Bernstein Research . PeterC Alexander, an analyst at Exane BNP Paribas, was less confident, saying that only half of the 900 million euros in synergies should materialize.
COMPETITORS IN AMBUSH
Risto Lehtilahti, union representative of R & amp division D of Nokia in Oulu, Finland, is concerned for his part in the risk of loss of contracts as it happened during the merger and acquisition of Siemens mobile assets the American Motorola. “The market shares do not stand up after the mergers. When we are in the transition period and before things become clearer, some contracts will go to competitors Ericsson and Huawei” Does explains -it.
“Customers know what these manufacturers offer so that it could take us between one or two years to come up with a range of products and customer systems.” Analysts are divided on the importance could take those “tell synergies,” Deutsche Bank rating to 1.5 billion euros the amount of potentially risky contracts while Bernstein estimated at less than a third that amount.
position on future technologies
The two groups will also be positioned on future technologies. Combining the power of Nokia in the mobile with the Alcatel in internet routers should place the future together in a good position for the “5G”, the next mobile technology that should erase the boundaries between fixed and mobile.
While the 5G should not be launched before 2020, analysts believe that operators will decide their suppliers based on their ability to provide a unique product roadmap by the end of 2017.
With Reuters
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