Stockholm/Paris: Nokia Oyj agreed to buy Alcatel-Lucent SA in an all-stock deal valued at €15.6 billion ($16.6 billion) to create the world’s largest supplier of equipment that powers mobile-phone networks.

Alcatel investors will receive 0.55 Nokia shares for each stock they own, Espoo, Finland-based Nokia said in a statement on Wednesday. The price is equivalent to about €4.12 based on Nokia’s closing price on Tuesday, or 8% less than Alcatel’s last close in Paris. Alcatel shares soared on Tuesday as the companies said they are in talks.

Nokia’s biggest-ever acquisition would result in a company that surpasses Ericsson AB and Huawei Technologies Co. in wireless infrastructure revenue, according to researcher IDC. The deal would allow chief executive officer Rajeev Suri to bolster Nokia’s position in China, a market of 1.3 billion mobile subscribers, and take on contracts with the two biggest US carriers—Verizon Communications Inc. and AT&T Inc.

Nokia also said it has started review of strategic options for its HERE maps business. The review may or may not lead to a transaction, the company said.

Alcatel shares rose 16% to €4.48 in Paris on Tuesday after the company confirmed it’s in advanced talks to merge with Nokia. Nokia closed 3.6% lower at €7.49 on the Helsinki exchange.

The takeover would also let Nokia add products used to transmit landline and Internet traffic, giving it a more complete offering to sell to carriers as the amount of data traveling on networks increases with the popularity of Netflix and other video and music services.

Nokia and Alcatel have more than 110,000 workers combined. Suri, who took over as head of Nokia’s networks unit in 2009 and became group CEO last year, has revived the equipment business by cutting more than 25,000 jobs over three years and focusing on more lucrative contracts.

French jobs

While France’s government doesn’t own a significant stake in Alcatel—one of its investment arms holds 3.25% according to data compiled by Bloomberg—it is concerned about what will happen to the approximately 7,000 people who work for the company in the country. Suri is in Paris this week to negotiate those details and his itinerary included a meeting with President Francois Hollande.

Economy minister Emmanuel Macron said Tuesday the government will closely monitor any consequences the deal may have on jobs, and will seek to make sure the transaction helps build a viable European champion.

Alcatel lost billions of dollars in the years following its 2006 merger with Lucent as it struggled to revive sales.

“Two years ago, Alcatel-Lucent was almost bankrupt with only some intellectual property rights buying it some bank financing," Macron said.

Whither Ericsson?

Still, Alcatel shares have more than tripled since Michel Combes became CEO in 2013 as he reduced costs and landed contracts from new customers. Combes has less than eight months left of his three-year turnaround plan, aimed at making Alcatel profitable and helping it generate cash.

Sweden’s Ericsson is now the largest maker of wireless-network gear—which includes equipment such as base stations and antennas that transmit mobile-phone calls and data—with a market share of 25.7% in 2014, according to IDC. Huawei had 23.2%, Nokia 15.8% and Alcatel 11.4% share.

Founded as a wood-pulp mill in 1865, Nokia’s transformations have included switches from rubber boots and toilet paper to cables, televisions, computers and mobile phones. It was the world’s largest handset maker—with a market value reaching €300 billion—before Apple Inc. and Samsung Electronics Co. claimed its leadership.

Nokia shares have more than doubled since the company agreed to sell its mobile-phone business to Microsoft Corp. in 2013 for about $7.5 billion. That deal left Nokia with net cash of about €5 billion at the end of last year. Bloomberg

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