Nokia and Ericsson will need to grow by acquisition to counter the long-term impact of the merger of Alcatel and Lucent on their business, analysts, quoted by AFP, said.
Although neither is threatened in its core business by the link-up between the French and US heavyweights, Nokia will need to move to protect its networks business, and Ericsson its fixed-line activities, the AFP report said.
Alcatel and Lucent earlier announced that they would merge to form a global giant worth about $33 billion.
'Nokia Networks will be smaller than this new entity,' Nordea analyst Karri Rinta, quoted by AFP, said. 'They will have to at least acknowledge the fact that organic growth won't be enough and that there is a need for acquisitions to strengthen product portfolio and market share.'
The report further said several analysts see that in the long term, an alliance or a merger with Germany's Siemens would make eminent sense for Nokia, as this would take both companies' combined networks market share to 25% against 15% for Nokia now.
Erkki Vesola, analyst at Mandatum, noted that Nokia's leadership has an 'almost cultural' aversion to large alliances, the report said.
Like Nokia, Ericsson need not fear for its core business following the Alcatel-Lucent merger.
But Ericsson's vulnerable spot is the fixed-line business, where the new French-US entity will be strong, analysts said.