Nokia, Alcatel-Lucent merger 'logical'

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Tuesday, April 14, 2015

Nokia and Alcatel-Lucent's potential merger is a logical step for both companies, but it could also bring in risks, London-based tech consultancy Ovum's chief research officer said.

According to Mark Newman, the transaction makes sense, since it would combine Nokia's mobile-only equipment business with Alcatel's strengths in the fixed-network business.

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But, Newman said, there could be problems: "A full merger would plunge both businesses back into a period of introspection and restructuring.

"It would create significant duplication in areas such as mobile broadband and small cells."

Technology firms Nokia and Alcatel-Lucent responded on Tuesday to recent media speculation about a potential acquisition by announcing talks were ongoing but that a decision had not yet been made.

"[Nokia and Alcatel] are in advanced discussions with respect to a potential full combination, which would take the form of a public exchange offer by Nokia for Alcatel-Lucent," the companies said in identical statements.

"There can be no certainty at this stage that these discussions will result in any agreement or transaction," they said, adding that a further announcement would be made "when appropriate."

The announcement follows rumors that Nokia was preparing to launch an acquisition offer for Alcatel-Lucent, which would reposition Nokia closer to technology competitors Ericsson and Huawei.

Alcatel has been through a period of change, launching The Shift Plan in 2013 to reposition the company as a specialist in IP networking from telecom equipment generalist.

The company has also been making cuts to reduce fixed costs by around 1bn euros (US$1.06bn)

Alcatel's shares ended the day more than 17% higher.