Nokia close to buying Alcatel's mobile networks unit

After selling its handsets business to Microsoft in 2013, Finnish telecom firm Nokia Oyj is in advanced talks to buy Alcatel-Lucent's mobile networks unit in order to better compete with Erricson AB, Bloomberg yesterday reported, citing people familiar with the matter.

Though the two companies confirmed on today of being in advanced discussions ''with respect to a potential full combination'', they cautioned that that there was no certainty of a deal materialising as yet.

Although a complete takeover of Alcatel has also been examined, a purchase of the mobile networks unit is the most likely, the report said and added that a deal may be announced as early as next week.

A potential deal would come a few days after Bloomberg reported that the Finland-based company is seeking buyers for its maps business known as HERE, valued at about €2 billion ($2.1 billion). (See: Nokia seeks to sell maps business valued at $2.1 bn)

Alcatel-Lucent's mobile networks unit had 2014 revenue of €4.7 billion ($5 billion), which is 36-per cent of the company's total sales of €13.2 billion, and a dal would significantly boost Nokia's market share as it seeks to emerge the top network equipment supplier, as Ericsson and others diversify into media services.

Alcatel and Nokia have held on-and-ff talks for years prior to Nokia selling its mobile handset division in 2013 to Microsoft (Microsoft to acquire Nokia's handset business for $7.1 bn). The sale left the company to focus on its networks business.

A deal would be a strategic move by Nokia to strengthen its core business as Alcatel is stronger in North America, where  Nokia has fledgling operations.

"Nokia is pitted against China's Huawei and Sweden's Ericsson for contracts to supply next generation mobile equipment to network operators. Huawei and Ericsson are neck and neck in the race to become the telecoms equipment industry's biggest group by revenue," Financal Times reported.

It added, Alcatel, which has struggled since the merger of France's Alcatel with US-based Lucent Technologies, is going through a lengthy restructuring process to turn round falling sales in its core markets in the US and Europe.

Under chief executive Michel Combes, Alcatel-Lucent, which been trying to cut costs for years in a bid to better compete against China's Huawei Technologies and Sweden's Ericsson, is trying to turn around the company which has lost money nearly every year since its creation in 2006.

Alcatel-Lucent was formed through the $13.4 billion merger of Altacel SA with US-based Lucent Technologies.

Combes' Shift plan unveiled in June 2013 involved asset sales, 10,000 job cuts and cost savings of €250 million to €300 million.

Combes has sold assets worth €350 million under his Shift plan and had earlier said that he was on track to divest €1 billion worth of assets by the end of 2015.

A successful deal would help Nokia to better compete against China's Huawei Technologies and Sweden's Ericsson.

But a deal will have to get the nod from the French government, which has in the past blocked foreign companies taking over French enterprises.