Combined business would be a challenger to market leader Ericsson
In a joint statement Nokia and Alcatel-Lucent have confirmed they are in “advanced discussions” for Nokia to buy Alcatel-Lucent.
Following one year after Nokia’s Devices business was sold to Microsoft, now the networking company appears to be attempting to increase its influence in the infrastructure business.
The two companies, which are among the weaker in the global telecoms equipment sector, stated that the deal, which would “take the form of a public exchange offer by Nokia for Alcatel-Lucent”, was not guaranteed. They said: “There can be no certainty at this stage that these discussions will result in any agreement or transaction.”
If the deal goes through the combined businesses will create a European telecoms equipment firm worth around £29 billion (Euro 40 billion) will be set to challenge the likes of market leader, Ericsson, and challenger, Huawei. If the businesses were combined last year, they would have had joint revenues of Euro 26 billion for 2014, beating Ericsson’s Euro 24.4 billion for the period, reported the FT.
Alcatel-Lucent is currently valued at Euro 11 billion while Nokia is worth Euro 29 billion. Alcatel-Lucent has been struggling for some time, although its fourth quarter and full 2014 results reported in February this year showed a slight recovery, with group revenues, excluding Managed Services, down 3% year on year, with IP Routing revenues up 15%. At actual rate, group revenues, excluding Managed Services, increased 2% year on year with IP Routing revenues up 20%.
Meanwhile in its fourth quarter results, Nokia Networks achieved 8% year on year growth in net sales, from Euro 3.1 billion in the fourth quarter 2013 to Euro 3.4 billion in the fourth quarter 2014, primarily due to strong performance in North America. Nokia Networks achieved strong underlying operating profitability with non-IFRS operating profit of Euro 470 million, or 14% of net sales, compared to Euro 349 million, or 11.2% of net sales, in the fourth quarter 2013.
Commenting on the fourth quarter and full year results, Rajeev Suri, Nokia President and CEO, said at the time: “…We will not shy away from investing where we need to invest. But, we plan to always combine that with disciplined cost control and a focus on delivering ongoing productivity and quality improvements across the company.”
