My friends Gim and Purna were sitting around the table with me one day debating potential mergers and acquisitions. After deliberating several ideas, we opined San Jose, CA-based Cisco should acquire Espoo, Finland-based Nokia in a merger using a combination of cash and stock.

I must admit, we came to this conclusion in a roundabout way. One of the first ideas we tossed around was the possibility of Lululemon being acquired by Nike or merging with either VF Corp or L-Brands. After all, The “Athleisure” market was hot and who doesn’t love yoga pants, Victoria secret and Nike shoes. We also debated the ideal combination between Intel and Nvdia, but dismissed it since government officials unlikely would approve the merger for antitrust reasons.

It did not take us all very long, however, to coalesce around my opinion that Nokia would provide Cisco a strong partner to compete in the telecommunications equipment market for wireless service providers who offer voice, data and video services. In fact, Nokia already is one of Cisco’s strategic partners offering secure Mobile Unified Communication solutions to Enterprises and Small and Medium Businesses. In fact, the more we discussed the benefits of Cisco acquiring Nokia the more excited we got.

The acquisition of Nokia fills a gap in Cisco’s product strategy, while positioning Cisco for the upgrade cycle of mobile networks that are: moving from 3G to 4G-LTE today in order to offer higher data rates and to increase capacity; and then transitioning from fourth generation (4G) technologies to fifth generation technologies (5G) in 2020.  5G will be optimized to enable mobile networks to more efficiently use their spectrum, offer higher data rates and capacity as the market for the Internet of Things (IoT) explodes.

Cisco will be able to fund the acquisition by raising low-cost debt in the U.S. and utilizing its cash reserves overseas. The United States tax code discourages companies from repatriating cash from foreign earnings. After all who wants to pay exorbitant taxes on earnings already taxed at least once. Cisco would be purchasing a foreign corporation with its cash reserves already abroad.  If there were a way to offer foreign investors cash, while offering U.S. investors stock, I’m sure a team of mergers and acquisition bankers and lawyers will be up to the task.

The successful acquisition of Nokia, in our opinion, will complete Cisco’s transition from a product market specialist providing routers to large enterprise customers in the mid 1980s to a full line generalist serving the needs of residential customers as well as small, medium and large business and service providers that provide voice, video, data and internet services over a CATV, wireline or wireless network.

If I were a Telecom, Media and Technology  investment banker specializing in mergers and acquisitions at a bulge bracket firm, I would make two phone calls: 1) to the bull pen to tell my staff to start sharpening their pencils and firing up Excel to get the pitch books ready or dusted off; and 2) getting on the phone with the management of both companies.  It’s true Cisco’s style is to make lots of smaller acquisitions.  However, it’s targets have started to move up in scale such as Cisco did with the acquisition of Scientific Atlanta so maybe it’s now ready to go for the big one.

Key Points

• Large Installed Base with Proven Track Record of Success:  Nokia has a large installed base of digital networks throughout the world where it has helped mobile operators build first generation digital networks starting with GSM in Europe as well as subsequent expansion of the technology to more than 140 countries including the United States. Nokia was able to duplicate this very same success as mobile operators underwent a major upgrade cycle every 5-7 years up to and including 4G networks.

• Streamlined Telecommunications Infrastructure Business:  Nokia until recently was a Finnish conglomerate with disparate businesses. Over the last several decades, Nokia has divested itself of pulp and paper products, cable wires, rubber tires and display terminals. Most recently, Nokia sold its mobile Devices & Services business to Microsoft so it is now a pure-play in wireless access infrastructure.

• Global Market Presence and Financial Strength: Cisco’s global market presence and financial strength will help Nokia compete more effectively to gain market share in wireless infrastructure market. Nokia already has 5 of the top 20 mobile operators in the world representing about 80% of the high-speed data users.

• Optimized for Over the Top (OTT) services: Next generation mobile networks are going to be optimized for OTT services such as Amazon Video, Netflix, Hulu, as well as the trend toward pay as you go video services such as HBOGo and CBS. This would mean migration of voice, video and data traffic from wire-line networks to wireless networks.

• Nokia has a patent portfolio critical for 5G networks:  In fact, it has more than 12,000 patents it can monetize just as Ericsson and Qualcomm have successfully done with their own patent portfolios

• 4G-LTE Still is Early in its Deployment Cycle: Despite the focus on the migration to 5th generation networks starting in 2020, the 4G-LTE market cycle still is in infancy. In fact, the LTE market is expected to increase 9 fold by 2020 in terms of subscribers, while data traffic could increase 8-fold during the same time frame due to video.

• Complete Product Portfolio:  Cisco dominates the market for telecommunications infrastructure used by businesses large and small as well as service providers serving the voice, video and data markets over both wireline and wireless networks. However, its product portfolio has a large gap because it does not offer wireless access infrastructure for mobile operators such as Verizon, AT&T, China Mobile and Vodafone. With the acquisition of Nokia, Cisco will be able to exploit the current migration from 3G to 4GLTE networks as well as position the company for next generation mobile networks also known as 5G mobile.

• Defensive Move: To the extent more and more people rely on their smart phones, tablet and other future mobile devices such as wearable’s where the user would like a seamless experience throughout the day, more and more traffic could move from the wired and WiFi infrastructure where Cisco is well positioned to the mobile communications infrastructure where Cisco is non-existent. The migration to the mobile Internet is especially hazardous for Cisco especially if carriers such as Verizon, ATT, Sprint PCS and T-Mobile offer more and more attractive data plans in order to make it attractive to have mobile phones be broadly embedded not just in tablets, but also automobiles, devices to assist with connect home and home automation, drones that are used from package deliveries to precision agriculture etc.

• Minimize the Cost of Cash Repatriation: Cisco will be able to fund the acquisition by raising low-cost debt in the U.S. and utilizing its cash reserves overseas. The United States tax code discourages companies from repatriating cash from foreign earnings. After all who wants to pay exorbitant taxes on earnings already taxed at least once. Cisco would be purchasing a foreign corporation with its cash reserves already abroad.

The rationale for the acquisition of Nokia is to complete Cisco’s evolution from a product market specialist supplying high-end routers for large enterprises to a full-line generalist with wireline and wireless solutions for consumers, small businesses, medium sized business and large enterprises as well as service providers that offer cable television, landline communications and mobile services