Nokia and Alcatel-Lucent have confirmed widespread speculation that they plan to merge.

Nokia’s mammoth $16.6 billion bid for Al-Lu has been approved by both companies’ boards and is expected to close in the first half of 2016, pending shareholder and regulatory approval, and customary closing conditions.

Nokia sold its mobile unit to Microsoft last year to focus on network infrastructure and services; mapping and location services; and technology development and licensing. The Finland-based company expects the Alcatel-Lucent purchase will make it “uniquely positioned to create the foundation of seamless connectivity for people and things … ” notably through the much-hyped Internet of Things and the ongoing transition to cloud computing.

The combined company hopes its giant research arm will help it accelerate development of technologies such as 5G, IP and software-defined networking, sensors, analytics and more.

“Together, Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services, with the scope to create seamless connectivity for people and things wherever they are,” said Rajeev Suri, Nokia’s president and CEO.

The deal sets up what could be an even more competitive battle in infrastructure sales between Nokia and Ericsson, which is the market leader. Both companies are being pushed by China’s Hauwei and ZTE, which tend to offer less expensive products. Alcatel-Lucent’s big contracts with AT&T and Verizon will likely help Nokia become a bigger player in the U.S., Reuters noted.

“Nokia’s acquisition of Alcatel-Lucent gives the company a much stronger share of the communications service provider infrastructure, software and services market,” commented researchers at Analysys Mason. “However, for success, Nokia must do a complete acquisition and be able to perform a portfolio rationalization very fast, or it can suffer the worst pains of its former mergers. The combined company will have a well-rounded portfolio that can cater to the requirements of CSPs engaged in optimizing and monetizing their networks and in moving toward virtualization and the digital economy in the long-term, [but] the manner in which the Alcatel-Lucent assets are integrated will be key to success in this area.”

It’s a little premature to know any channel impact. Nokia sells mobile broadband services through select partners who add those services to their portfolios – Nokia’s goal being to enter new markets. Alcatel-Lucent’s partner program allows systems integrators, VARs and distributor to sell its IP networking, cloud and broadband services, backed by resources and training.

Follow senior online managing editor Craig Galbraith on Twitter.