Nokia and Siemens have agreed to combine their telecom equipment units in a deal creating one of the biggest players in the industry, the companies said on Monday.

Shares in both companies surged on the news, with Siemens climbing more than 7 percent.

The firms said the businesses to be joined in the 50-50 joint venture called Nokia Siemens Networks had sales of 15.8 billion euros ($20 billion) last year.

German industrial conglomerate Siemens declined to comment on financial details of the deal, which the Wall Street Journal has reported is worth $31.6 billion.

The deal will put the new company in the same league as current industry leader Cisco Systems Inc. and the new merged Alcatel-Lucent in terms of sales, and offer savings as they take on fierce competition.

The two companies said they expected cost synergies of 1.5 billion euros annually by 2010 from the combination of Nokia's networks division and the Siemens carrier business in fixed and mobile networks.

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

By 0735 GMT, Siemens shares were up 7.5 percent at 67.52 euros, while Nokia was up 2.9 percent at 16.10 euros.

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