Azernews.Az

By Bloomberg

Nokia Oyj is in advanced negotiations to acquire Alcatel-Lucent SA to strengthen its telecommunications- equipment business and better compete with Ericsson AB.

The companies are in “advanced discussions with respect to potential full combination,” Espoo, Finland-based Nokia said in a statement on Tuesday. No agreement has been reached and a deal could still fall apart, the company said.

The two companies make network equipment such as base stations and antennas that transmit mobile-phone calls and data, competing against Sweden’s Ericsson and China’s Huawei Technologies Co. Alcatel has a market value of about $12 billion, and Nokia has a market capitalization of $30 billion.

Nokia executives are seeking to secure French state backing for a sale of the assets, a person familiar with the matter said. Any deal would need a green light from President Francois Hollande’s government, which has previously tried to block corporate mergers in the country. French government officials are working with advisers on a transaction that would protect some domestic research jobs, people familiar with the matter said.

Maps Divestment

Both stocks jumped for a second day in European trading after Bloomberg News reported on Friday that Nokia is exploring a sale of its maps business known as HERE.

The planned disposal of HERE has led analysts to speculate that the proceeds could be used to help pay for acquisitions.

By purchasing Alcatel, Nokia Chief Executive Officer Rajeev Suri would bolster the Finnish supplier’s position in China, a market with some 1.3 billion mobile subscribers, and take on some contracts with the two biggest U.S. carriers -- Verizon Communications Inc. and AT&T Inc.

Consolidation has dominated conversations in the network- equipment industry for at least the past five years, as price wars dragged profits down and carriers reduce spending on infrastructure amid sluggish revenue. Suri and Alcatel CEO Michel Combes have eliminated jobs and focused on more profitable contracts.

Talks between Nokia and Alcatel have been on and off in the past.

Shares Rebound

Alcatel shares have more than tripled in the past two years as the company underwent a restructuring. Nokia has more than doubled since it agreed to sell its mobile-phone business to Microsoft Corp. in 2013 for about $7.5 billion. Nokia’s 5 billion euros in net cash can also help the Finnish company finance any transaction.

Under Combes, Alcatel has pushed to sell more equipment to the likes of Google Inc. and Amazon.com Inc. and become less reliant on carriers. It has reinforced product offerings for landline networks, from routers to a variety of equipment used in services such as cloud computing.