Alcatel and Lucent Technologies are to merge, creating a company with a turnover of £14bn.
The network suppliers said they expected to complete the merger over the next six months, once regulatory and governmental obstacles had been overcome. Job losses are expected.
Jean-Charles Doineau, an analyst at Ovum, said the combined company was expected to save £975m after three years, with 30% of this total being saved in the first year. He said a large chunk of the savings would come from staff layoffs, which will reach up to 10% of the workforce.
"The agenda of the new company is pretty clear, and will certainly be focused on delivering operational efficiency gains at the very beginning," he added.
Possible stumbling blocks for the deal are confidentiality concerns over French firm Alcatel's space and satellite interests and Lucent's highly confidential work for the US government.