Nokia's Suri: Wireless integration will require 'heavy lifting' in Alcatel-Lucent deal

Nokia's (NYSE:NOK) CEO Rajeev Suri said that its deal to acquire Alcatel-Lucent (NYSE: ALU) is progressing well, and that the most difficult integration will be the companies' individual wireless businesses. Suri, in an interview with The Times of India, also said that the combined company will offer a more comprehensive set of services than rival Ericsson (NASDAQ: ERIC).

Rajeev Suri Nokia CEO


Suri, who will become CEO of the combined company, noted that the vendors are "very much on track" to close the transaction in the first half of 2016 and are still waiting on approvals from China, the French government and "a couple of tiny" countries he did not name.

Suri reiterated that the companies expect to achieve around $1 billion (€900 million) in operating cost synergies on a full-year basis in 2019 and said broadly Nokia expects to cut general and administration costs, as well as make some cuts in wireless radios, research and development, procurement and maybe in sales.

Yet Suri said that with large mergers like Nokia/Alcatel-Lucent, "the challenge is always around culture. I think that's often underestimated because people focus on the substance and the practical, soft steps go missing. Not many integrations of such scale have succeeded."

Last week Nokia unveiled a new leadership team and organizational structure for the company post-merger, and of the 13-strong leadership team, 10 members will come from Nokia. Suri said that the firm will have "clear governance," which will help make the integration successful.

"Another big difference is the overlap in only one part of the business. Everything else is complementary," he said. "I don't have IP. I don't have transport. I don't have fixed [assets], so I don't need to integrate them."

Notably, Suri added that "radio is where the heavy lifting will take place in wireless and that's where we need to integrate and there of course will be some struggles during the process."

The four divisions of the new company will be mobile networks, fixed networks, applications and analytics, and IP/optical networks and will be grouped into the "Networks" business unit for financial reporting. Nokia Technologies will remain as a separate entity and will continue to be led by Ramzi Haidamus as president of the division.

Suri said that the combined firm will be better positioned in some respects than Ericsson, especially in fixed networks. "Our portfolio is more end-to-end than Ericsson's and it is more like Huawei," he said. "Both of us are more end-to-end because we have IP, fixed, transport, mobile and the applications and analytic business on top. If you think about Ericsson it lacks some of this. It doesn't have IP, doesn't have fixed, and doesn't have that credibility in transport. So we are the Western alternative to Huawei."

An Ericsson spokeswoman declined to comment.

For more:
- see this Times of India article

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