Nokia has struck a 15.6 billion euro ($A21.64 billion) deal to buy its rival Alcatel-Lucent to create the world's biggest supplier of mobile phone network equipment.
The Finnish telecom giant on Wednesday agreed to give shareholders in its Franco-American rival 0.55 shares in the new merged company for every one of their own.
The new group "will be uniquely positioned to create the foundation of seamless connectivity for people and things wherever they are," Nokia's statement said.
It will go by the name Nokia, be based in Finland, and be run by Nokia's current management team, it said.
The group is targeting savings of 900 million euros in costs by the end of 2019 without further job cuts following the restructuring, both companies said, adding the merger should save an additional 200 million euros in financial charges.
Alcatel-Lucent boss Michel Combes, told French TV channel BFM Business the new group was committed to "increasing R&D activities in France by 25 per cent" by hiring 500 additional researchers, bringing the total research and development workforce in the country to 2,500.
"The new group's innovation and research capabilities on a global scale will be spearheaded in France," he said.
The French government said on Tuesday it was concerned about jobs disappearing in France if the merger were to go through.
Rumours have swirled since December of a possible deal between the two firms, with France's Les Echos reporting on Monday that executives had been in negotiations since January.
Nokia was the world's biggest mobile phone maker for more than a decade until it was overtaken by South Korea's Samsung in 2012.
Then in 2014, Nokia sold its mobile phone and tablet division to US software giant Microsoft, and the company now develops mobile and internet network infrastructures for operators.
Nokia is now set for a significant boost in market share.
The deal will also help Nokia bolster its mobile infrastructure business against Swedish arch-rival Ericsson and China's Huawei, profiting from Alcatel's position as a leading supplier of 4G and LTE mobile networks and related services.
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