The rise, fall and rise again of Nokia

On the campaign trail this week ahead of Sunday's general elections, Olli Rehn has been confronted with a new topic: Nokia.

Since Wednesday's announcement of an agreed all share bid for Alcatel-Lucent, giving the French company an enterprise value of €15.6bn, Mr Rehn - a former European commissioner tipped to be a minister in the new government - said he had heard lots of opinions from people on the streets and in marketplaces.

"It has created mixed feelings. On the one hand, one can take it as a tentative revival of Nokia. On the other, ordinary people are asking if the price was worth paying [in terms of jobs]," says Mr Rehn.

The rollercoaster ride of the company's rise and fall of Nokia in recent decades has accompanied a similar journey for Finland.

The success of Nokia in the late 1990s and early 2000s when it became the world's leading mobile phone manufacturer fuelled a sense of national self-confidence - as well as providing 4 per cent of GDP and a quarter of corporate tax receipts at the peak. The subsequent fall from grace and brush with near financial collapse of Nokia was also deeply felt by Finns, and helped spark a national economic crisis.

Mr Rehn says the sale of the company's phone division to Microsoft in 2013 "was a huge psychological blow for Finland and the self-confidence of the Finnish people. Nokia was one of the things we have been most proud of in our history like Sibelius or the Winter War [against Russia]."

Some have heralded Nokia's takeover bid for Alcatel-Lucent - the biggest in Finnish corporate history - as a sign that the once-great company started as a pulp mill in 1865 has regained its spark, this time in the telecoms equipment business. "We can be proud again of Nokia and that feels great. I am excited to follow how a new chapter in Nokia's history is being written again," says Veli-Pekka Marin, a former Nokia employee who is chief executive of Uplause, a niche gaming start-up.

But any excitement is tempered by fears over jobs after Nokia committed to no cuts at Alcatel-Lucent in its home market of France. A former board member of the Finnish group says: "It heals things halfway, or 30 per cent. Time will tell. Everybody is concerned about the jobs in Finland because management made a lot of commitments to jobs in France and only something flaky in Finland."

Few companies have been through as many reinventions and revivals as Nokia. Rubber boats, tyres, gas masks and television set-top boxes are among the hundreds of different products the Finnish company has produced in its history.

It entered the mobile phone business in the early 1980s but by the end of the decade both Nokia and Finland were in crisis. The company had overextended itself and regional rival Sweden's Ericsson sniffed out a possible takeover.

Jorma Ollila, a former banker, was appointed chief executive in 1992 and led Nokia's revival, making the company the world's biggest seller of mobile phones by 1998 when it surpassed Motorola of the US. The focus on mobiles intensified in 2006 when, during the football World Cup in Germany, it spun off its networks business into a joint venture with Siemens.

When Nokia's mobile phone business went into its next crisis after missing the move to smartphones at the end of the 2000s, there were attempts to extricate itself entirely from the telecoms equipment sector. Nokia Siemens Networks was touted for sale to private equity firms in 2010-11 but nothing came of it and a deep restructuring programme involving thousands of job cuts was launched instead - just as Finland went into an economic slump.

In a dramatic reversal of fortunes, by 2013 Nokia had decided to place its bets for the future entirely on the business, buying out Siemens from the joint venture in July and selling the mobile handset division to Microsoft in September. That business will be further strengthened by the Alcatel-Lucent deal, placing Nokia on an much better footing in terms of revenues with market leaders Ericsson and Huawei of China.

Nokia had been talking to its smaller French rival on and off about acquiring its wireless business since 2013 but talks took off in the first months of this year when it became clear a full takeover was possible.

Rajeev Suri, Nokia chief executive and a former NSN boss, says the deal is about responding to convergence among telecoms operators, which are increasingly offering combined fixed and mobile services as well as TV offerings. Nokia has concentrated heavily on the mobile internet recently so adding Alcatel's strong position in fixed broadband will improve what he calls "the scope".

Nokia's chief executive said he has learnt from the troubled start to NSN's existence. The Alcatel deal is structured as a clear takeover with both Mr Suri and Risto Siilasmaa, Nokia's chairman, retaining their jobs. "If you start with a compromise you live with a compromise for a long time," Mr Suri says.

"Previous mergers that we both had have been driven out of survival and driven solely to cut costs to get synergies and create something new. This one is different. It is really about scope first and foremost," Mr Suri adds.

Cost-cutting programmes at Nokia and Alcatel-Lucent are largely over while the all-share nature of the deal - and a potential sale of Here, the Finnish company's mapping business - mean the combined group would have a net cash position of about €7bn.

Nokia shareholders seem to have mixed feelings on the deal. One big Finnish investor is optimistic. "I still believe they will do more acquisitions in the coming years. This is a very interesting deal but it's not a growth deal," he says, referring to the lack of sales growth at both companies in recent years.

But another Finnish shareholder is more worried, believing Nokia had just shed its tag as a risky investment. "Buying the whole company, and not just the wireless part, is more risky. Suri's record has been very good but maybe now he thinks he can fix every problem and that worries me," the shareholder says.

The topsy-turvy nature of Nokia's recent history means the deal is also unsettling many of its employees in Finland. Tuula Aaltola, a shop steward for Nokia's senior workers, says there is a big worry that job guarantees in France mean that cuts will take place elsewhere. "It doesn't make sense: we are the ones doing well," she says.

A "big fear" is the cultural differences between the French and Finns. But perhaps above all the feeling is one of apprehension ahead of another big change at Nokia.

"One of the biggest fears is a bit of exhaustion. We remember how big a job it was to integrate Nokia and Siemens," she says. "Finally things were going well. We were settled. And now we will start all over again."

Additional reporting by Adam Thomson and Arash Massoudi

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