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We upgrade Nokia to Overweight and raise our target to EUR8.75, providing 20% implied upside from current levels. We view the combined Nokia and Alcatel-Lucent as a stronger force in the global networking space, one that should deliver both top and bottom line growth as well as increased shareholder returns. We have rated Alcatel-Lucent Overweight for its growth prospects in IP routing and transport combined with margin expansion from its restructuring plan. We were however more cautious on Nokia fearing patent revenue would not grow soon enough to offset declines in Networks revenue and profitability. A combined group should bring growth in IP routing/transport, synergies in wireless/corporate and an improved financial structure. We estimate material accretion of around 50% in 2017 vs. our prior Nokia estimates. While M&A in telecom equipment has historically been fraught with difficulty, we think things are different this time and find the risks manageable. Nokia shares are trading on 1.5x/1.4x 2017/18 NewCo EV/sales and 15x/13x PE, while delivering a high-teens earnings CAGR from 2016-19. We find these multiples compelling and upgrade to OW with an EUR8.75 PT.