Nokia’s new CEO said he hopes to grow the company through acquisitions, and now a German media report says Nokia is considering a merger with its direct competitor, Alcatel-Lucent. Germany’s Manager Magazin reports that the two companies have been in talks since fall about ways they might work together. Alcatel-Lucent’s shares surged 8% on the news, leaving the company with a market capitalization of almost $9.2 billion at the end of the day on Thursday.
Merger rumors have swirled around these two European companies in the past, even before Nokia shed its troubled device business by selling it to Microsoft for more than $7 billion. The sale left Nokia with a multibillion-dollar war chest, and the company has been building its portfolio of wireless properties.
Nokia is now focused on three lines of business: telecom equipment, intellectual property and mobile mapping software. Telecom equipment is by far the biggest of these, and Nokia’s LTE business has been a bright spot within that segment.
Nokia Networks booked more LTE revenue in the third quarter of this year than any of its rivals, according to analyst Stéphane Téral of Infonetics Research. Téral said customers in China and the U.S. are driving Nokia’s growth.
A merger with Alcatel-Lucent would give Nokia even more access to U.S. telecom customers. Unlike Nokia, Alcatel-Lucent has been an LTE vendor to the nation’s two largest carriers, AT&T Mobility and Verizon Wireless.
Alcatel-Lucent itself is the product of a merger between Alcatel and Lucent. After a rough start, the combined company has found its footing recently under the direction of CEO Michel Combes, who has set a course to turn the company into an IP networking and broadband specialist. The company claims a leadership role in software defined networking, and is also the world leader in small cell deployment according to ABI Research.
A Nokia bid for Alcatel-Lucent might meet objections from the French government if French jobs are threatened. It might also raise some antitrust concerns in the European Union, although the combined company would still be in competition with Ericsson, currently the world’s largest wireless equipment vendor, and with Asian rivals Samsung, Huawei and ZTE.
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