Nokia on Tuesday revealed that it is holding talks that could see it buy out arch-rival Alcatel-Lucent.
In response to media speculation on the subject, the companies issued a joint statement to confirm "they 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 European equipment makers added the usual caveat that there is no certainty the talks will result in a deal and said they will make a further announcement when appropriate.
The comment comes after Bloomberg on Monday cited sources familiar with the situation as saying that the pair were holding advanced talks wi th a view to Nokia acquiring Alcatel-Lucent’s wireless assets and could announce a deal as early as this week.
Earlier on Monday the newswire claimed that Nokia was looking to sell off its mapping business Here and listed a number of suitors for the unit, including private equity firms, taxi booking app maker Uber, and a group of German car makers. It put the value of Here at around €2 billion.
At the time, Nokia declined to comment.
Radio Free Mobile founder Richard Windsor questioned the logic of selling Here, highlighting it as a growth opportunity for Nokia, particularly at a time when various companies’ mapping deals with Google are due to expire.
"Many of the deals with Google were struck some time ago and many customers now view Google as a competitor and I think would welcome an independent supplier of mapping data," he said, on Monday.
"Much of this opportunity still lies in front of Here and as a result, selling Here now for €2 billion is doing shareholder[s] a disservice," he added, recommending that Nokia raise the money it requires through debt instead.
Indeed, in recent months Nokia CEO Rajeev Suri has repeatedly spoken out about Nokia’s ability to generate synergies between its networks business and Here.
Windsor also warned that while the combination of Nokia and Alcatel-Lucent’s wireless infrastructure businesses "makes some sense" in a highly-competitive market dominated by Huawei and Ericsson, such a tie-up would still be fraught with risk.
"As a smaller player, Nokia Networks clearly needs more scale and buying the wireless assets of Alcatel-Lucent will help it do that; however…execution of these sorts of mergers in the past has proved very difficult and in every case it has failed to fix the problem," he said .
"Given Rajeev Suri’s execution of the turn-around of Nokia Networks, he has a good chance of making this work but history is dead against him," Windsor warned.
Nokia Networks came into being in its current state – albeit with a slightly different name – in August 2013 when it bought out its former partner Siemens. The pair announced plans to combine their networks businesses to create Nokia Siemens Networks in mid-2006.
That announcement came just months after Alcatel agreed to buy Lucent Technologies.
The two – or four – vendors have found life difficult in the intervening years.
However, since becoming head of Nokia Siemens Networks in late 2009 and later CEO of Nokia following the sale of the handsets business, Suri has worked hard to return the company to profitability.
And Alcatel-Lucent attributed the considerable reduction in net loss in 2014 to its ongoing Shift Plan, through which it aims to turn profitable and cash flow positive this year.
It will be interesting to see whether those experiences help Nokia and Alcatel-Lucent to manage the integration process with less pain this time around…presuming their discussions result in a deal, that is.
