The €15.6-billion deal between Nokia and Alcatel-Lucent (ALU) is expected to make the combined entity the biggest player in the Indian telecom equipment segment, both in terms of market-share and employees, displacing Swedish rival Ericsson. After the acquisition, Nokia will have nearly 20,000 employees, matching Ericsson.

It will also get a stronger foothold in the data network equipment market, which includes routers and switches, in which Alcatel-Lucent has a strong product portfolio. With this, Nokia will be able to compete with the likes of Cisco and Juniper for IP-based contracts. Nokia can also make inroads into the government sector, especially defence, where Alcatel-Lucent had managed to win some contracts to set up communication networks.

Losing momentum The deal comes at a time when Alcatel-Lucent has been struggling to keep up the momentum in India. The equipment vendor has not won any major contracts this year and has seen some high-profile exits, including its country head Munish Seth. The wheels have also come off joint venture arrangements with Airtel and Reliance Communications. Nokia, on the other hand, has emerged stronger in the network equipment segment over the last year winning big contracts.

Ravi Sharma, former CEO (South Asia) at Alcatel-Lucent, told BusinessLine that the company would now be able to provide better products and services at competitive prices. “Alcatel-Lucent’s R&D presence in India would also help the company emerge stronger in the telecom equipment space here.”

Alcatel-Lucent has three research and development centres in India — in Gurgaon, Bengaluru and Chennai — with around 2,500 employees. In addition it has about 1,000 people in other roles, including sales.

“The acquisition will help Alcatel-Lucent come out of the ICU. Nokia could gain from its strengths in optical networking and the CDMA business,” said a former ALU executive. Close to half of India’s fixed and CDMA wireless lines are powered by Alcatel-Lucent technology. But Nokia had exited both these segments as part of its focus on wireless broadband.

This is where there could be some challenges in terms of integrating the two companies, especially when it comes to streamlining the workforce.

“When Lucent merged with Alcatel, there were challenges in aligning resources. Alcatel took control of the business and many from Lucent had to leave. Nokia and Siemens also went through this when they merged. A similar thing could happen again because there are too many overlaps between Nokia and ALU,” said A Sethuraman former Chief Marketing Officer, ALU.

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