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Nokia, Alcatel-Lucent merge given BEE conditions locally

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 26 Feb 2016
SA's competition authorities ruled there can be no loss of value for BEE shareholders due to the Nokia and Alcatel-Lucent merger.
SA's competition authorities ruled there can be no loss of value for BEE shareholders due to the Nokia and Alcatel-Lucent merger.

South Africa's competition authorities have agreed to local conditions for the merger between global telecom giants Nokia and Alcatel-Lucent, relating to black economic empowerment (BEE) and retrenchments.

The Competition Tribunal heard the case this week after the merging parties approached the tribunal for an amendment to certain conditions stipulated by the Competition Commission when it initially approved the intermediate merger last September.

The disputes related largely to employment matters and the impact on BEE shareholders of the companies locally.

"The commission and the merging parties reached an agreement, and approval was granted on those terms by the tribunal," the tribunal confirmed in a statement.

Amended conditions

"Nokia undertakes not to integrate its South African subsidiaries with Alcatel-Lucent's South African subsidiaries in a manner that results in a loss of value for BEE shareholders," the new amended conditions read.

The tribunal says the merging parties argued the commission erred when drafting the original conditions relating to BEE. They called the conditions "vague and unclear" in relation to BEE, but the parties have now agreed to amendments which they feel are clearer.

The authorities also agreed the valuation of the relevant assets and shareholdings of the respective BEE shareholders will be calculated at the time of integration of the South African subsidiaries in accordance with specific clauses of their shareholder agreements.

The BEE shareholders involved are Sekunjalo, Africom and Kunene Technology Investments.

The Competition Commission approved the merger, with conditions, on 8 September 2015. At the time, the commission found the merger "raises public interest issues relating to employment and black economic empowerment".

The original conditions outlined the commission's concern over the "uncertainty regarding the post-merger impact in respect of BEE". At the time, the commission's conditions called for the merger not to "dilute the shareholding of the BEE shareholders" post-merge.

The commission says it has now "received clarity in respect to the applicable method for the valuation of the BEE shareholdings in accordance with the shareholders' agreements, should any adjustment to the BEE shareholdings be made after the integration phase".

In terms of employment conditions, the new company cannot retrench more than 60 employees because of the merge.

"The affected employees shall be the first to be offered employment within Nokia in South Africa, for which they are suitably qualified, when vacant positions become available and this will occur before the vacant positions are advertised externally," according to the amended conditions.

The offer to affected employees will continue for a period of 12 months after the merger.

Finland's Nokia officially announced it would buy French Alcatel-Lucent for $16.6 billion in April 2015. On 15 June 2015, SA's Competition Commission received notice of the intermediate merger.

In terms of a global merge, Nokia gained control of its French counterpart in early January 2016, and on 22 February, Nokia confirmed it now owns almost 92% of the share capital of Alcatel-Lucent.

In terms of compliance, Nokia has 30 business days from its integration date to submit a report to the commission to confirm compliance with the BEE-related conditions.

The merged entities also need to submit a report on an annual basis to confirm compliance with the conditions. This must show specific indications of the number of retrenchments followed through on and reasons for the retrenchments.

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