Nokia and Alcatel-Lucent are joining forces in an attempt to create a new global leader in the fast-evolving communications equipment sector, which is still trying to come to terms with the Internet and the rise of IP-based networks. The Finnish company Nokia has announced that it is buying the French Alcatel-Lucent in an all-share transaction that values Alcatel-Lucent at €15.6 billion (around $16.6 billion), a premium on its current market value of $11.6 billion. Nokia has a capitalization of $30.4 billion. The proposed transaction is expected to close in the first half of 2016 and is subject to approval by regulatory bodies and shareholders. The combined company will be called Nokia Corporation, with headquarters in Finland.

Explaining the fusion, Nokia said in its press release: "Alcatel-Lucent and Nokia have highly complementary portfolios and geographies, with particular strength in the United States, China, Europe and Asia-Pacific. They will also bring together the best of fixed and mobile broadband, IP routing, core networks, cloud applications and services." A salient feature of both companies is their failure to establish themselves in the key smartphone sector, largely through an inability to respond fast enough to the rise of Apple and Android.

It's probably too late for even the newly enlarged Nokia to regain significant share in this market, bearing in mind Microsoft's repeated failure to do so, notably after it acquired Nokia's mobile phone division in 2013. Instead, the merged operation is likely to seek to establish itself as a major player in the telecommunications and networking infrastructure sector.

Here it faces strong competition from the market leader, the Chinese Huawei, and the Swedish Ericsson. Both are large companies, which probably explains why Nokia was keen to increase its size and resources by merging with Alcatel-Lucent. The new company will be able draw on strong research divisions, notably Alcatel-Lucent's renowned Bell Labs. As Nokia explained: "With more than 40 000 R&D employees and spending of EUR 4.7 billion [around $5 billion] in R&D in 2014, the combined company will be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging."

The European Commission will doubtless be hoping that the acquisition of Alcatel-Lucent by Nokia will lead to the creation of a major new force in the crucial telecommunications and networking equipment market. But it will also be aware that this is probably Europe's last chance to strengthen its position here.

In separate news, Nokia has announced that it has "initiated a review of strategic options, including a potential divestment" for its mapping service, HERE. The company says that in the light of its proposed acquisition of Alcatel-Lucent, "this is the right moment to assess the position of HERE within the proposed new Nokia business."