Germany's Siemens and Finland's Nokia announced Monday plans to merge their telecommunication equipment divisions in a move that would create the world's third biggest equipment group worldwide.

Each company will hold 50 percent of the new concern, Nokia Siemens Networks, which will provide infrastructure for fast-growing telecommunications traffic.

Based on the companies' performances, Nokia Siemens Networks would have posted 15.8 billion euros ($19.9 billion) in revenues last year and would have some 60,000 employees.

The merger - which still requires approval by competition authorities - is aimed at generating cost savings of 1.5 billion euros ($1.9 billion) a year by 2010, the companies said.

Nokia appears set to play a leading role in merger. The new company will have its headquarters in Helsinki with the current boss of Nokia Networks, Simon Beresford-Wylie, expected to take the helm as chief executive.

"We believe the partnership with Siemens is the most effective way to build the scale and broad product portfolio necessary to compete globally and create value for shareholders," said Nokia CEO Olli-Pekka Kallasvuo in a statement.

Siemens chief executive Klaus Kleinfeld said the "combination creates a leading industry player with immediate strength, excellent potential for growth and well positioned to improve future profitability."

European and US telecom companies are struggling to compete with Asian companies which have lower costs.

Based on current market share data, Nokia Siemens Networks was the second-largest company in mobile infrastructure, second in services, third in fixed infrastructure, and the third largest in the telecom infrastructure market.

Overall, Nokia Siemens Networks would be number three worldwide with the alliance of Alcatel and Lucent merger in first place, followed by Ericsson/Marconi.