Bill Gray
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Nokia is buying Alcatel-Lucent for $16.6 billion

Nokia confirmed Wednesday that it will buy Alcatel-Lucent, a deal that will create a telecom-supply giant and possibly spur a wave of consolidation in the industry.

The all-stock deal values the French firm at €15.6 billion ($16.6 billion). The combined company will be called Nokia Corporation, with headquarters in Finland.

Alcatel (ALALF) shareholders will be paid 0.55 Nokia (NOK) shares per Alcatel share, a 28% premium over the company's three-month weighted stock price.

Both firms provide equipment, infrastructure and support to the telecommunications industry. Alcatel shareholders will own 33.5% of the combined company.

The marriage between Nokia and Alcatel should give the combined company more clout when competing with rivals like Sweden's Ericsson (ERIC) and China's Huawei.

Nokia, which sold its handset unit to Microsoft last year, has a market capitalization of about €27.7 billion ($29.5 billion). Alcatel is less than half the size, with a market value around €12.6 billion ($13.4 billion).

Nokia was once a giant in the mobile phone industry but was clobbered by Apple (AAPL, Tech30) andSamsung (SSNLF). Nokia shares hit a peak in 2007 and then tanked.

Since selling its mobile phone business to Microsoft, the company has refocused on its telecommunications and broadband offerings.