Nokia and Alcatel-Lucent restart merge talks

Alcatel-Lucent and Nokia Corp. have restarted talks about a possible merger, according to a media report. If the companies become one, they will be the world’s largest manufacturer of telecommunication equipment with formidable portfolio of telco patents.

The Manager Magazin reported this week that Nokia, with its strength in wireless networks, could take advantage of a union with Alcatel-Lucent, with its fixed-line network assets, as distinctions blur between wired and wireless networks in a mobile broadband world, reports Reuters news-agency.

In the past Alcatel-Lucent and Nokia already held merger talks, but the result was negative. A source familiar with the matter said that the negotiations have been ongoing for five years. One of the potential issues is that French authorities could block the deal in order not to risk massive job cuts as a result of the tie up.

Nokia headquarters

“The old rumor comes back to the table,” said Mikael Rautanen, an analyst with Inderes Equity Research. “The pressure for the market to consolidate is obvious.

Another roadblock on the way of a potential merger is the fact that Alcatel-Lucent is not profitable, unlike Nokia. Moreover, large parts of Alcatel-Lucent would not make a good fit with Nokia and would need to be spun off or sold for any deal to make sense.

“One should remember that mergers in this sector have a poor success history, they are very risky,” said Mr. Rautanen.

Alcatel-Lucent and Nokia did not comment on the news-story.

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KitGuru Says: Nokia has just managed to become profitable after selling off its money-bleeding smartphone division to Microsoft. Merging with Alcatel-Lucent will make it lose money again. Still, the combined company will be extremely powerful, something that makes the tie-up possible and viable from the management point of view.

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