Nokia is in talks to buy Alcatel-Lucent

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By Larry Banks

Nokia is apparently in advanced negotiations to acquire Alcatel-Lucent to strengthen its telecommunications equipment business and be able to compete more effectively with Ericsson and Huawei, according to Bloomberg.

Nokia in “advanced discussions” to acquire Alcatel-Lucent

The companies are said to be in “advanced discussions with respect to a potential full combination”, a statement from Nokia read on Tuesday. There is however no agreement yet and the deal could still fall apart.

Both companies produce cellular network equipment like base stations and antennas that are used to handle mobile phone calls and data. They compete against Sweden’s Ericsson and China’s Huawei Technologies.

Alcatel now is valued at around $12 billion, and Nokia’s market cap is $30.28 billion. Nokia execs are trying to get French government backing for a sale of the assets, according to sources. But any deal would need to be approved by the government, which has previously blocked huge corporate mergers in France. Government officials are working with advisers on some kind of deal that would protect domestic research jobs, however.

Nokia to sell HERE maps

Nokia HERE Maps

Both companies’ stocks jumped in European trading after it was reported on Friday that Nokia may also sell its maps business called HERE. That led analysts to speculate that it would use the funds to pay for acquisitions. And by purchasing Alcatel, Nokia CEO Rajeev Suri said it would help the company’s position in China, where there are more than 1.3 billion mobile subscribers.

Consolidation has been looking for the past five years as price wars have weakened profits, and mobile operators reduce their spending on infrastructure as revenues fall.

Alcatel shares triple in two years

Alcatel has seen its share price triple over the past two years as it has been restructured. Nokia has also doubled since it sold its struggling mobile phone business to Microsoft in 2013 for $7.5 billion. Nokia’s 5 billion Euros in net cash have also helped the company finance the planned acquisition.

If the purchase goes ahead, it remains to be seen how the combined company will compete more effectively in the network equipment market, and expand into other territories.

SOURCE: Bloomberg

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