A merger between Nokia and Alcatel Lucent would bring that company to over take Huwei at number two. Communications and mobile phone hardware is an interesting industry, as the research and development costs are high and consumers expect an affordable high-tech product.
Mergers have been happening a fair bit in the past few years following the introduction and hey day of mobile phone buying. When the market was new, manufacturers flooded a market to get in on a new industry. Over time, the companies have folded or mergers have taken place. Nokia’s current company is the result of a take over of Siemens, while Alcatel-Lucent merged when both were struggling.
An area that the Nokia/Alcatel-Lucent merger would work is with US and European nations, as Chinese companies (Like Huwei and ZTE.) aren’t trusted due to their connections with the Chinese government. Huwei and ZTE deny they are a security risk and argue against any accusations. Security and privacy are big concerns of users, businesses and governments.
It still means the largest company, Ericsson, are their biggest rivals in most markets. If this merger goes ahead, it will mean the two largest network equipment companies will be based in Europe. Alcatel-Lucent is a French company, Nokia is Finnish and Ericsson based in Sweden. The challenge for European companies is to find ways to make their products cheaper. Chinese companies, while finding it hard to gain ground in some countries, are able to sell their devices at lower prices.
Telephone and communications hardware is in a period of consolidation. According to Bentgt Nordstron, co-founder of telecom consulting firm Northstream, “After years of growth, the telecom industry is now shrinking. A combination of Nokia and Alcatel was bound to happen at some point.”
Purchases of phones and equipment has dropped due to customers already having equipment and upgrading when they need to, rather than when the new product is released. Many phones that run the Android system are already very similar, so the issue for companies becomes cost. While Microsoft’s Windows OS on mobiles wasn’t able to compete with other devices. Price is what can define the product more than specifications. Other products designed for business or government needs come with heavy security requirements.
Update: Nokia confirmed that they acquired Alcatel-Lucent for $16.6 Billion.