shares jump 8 percent on Nokia merger report
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[December 18, 2014]
By Eric Auchard and Jussi Rosendahl
LONDON/HELSINKI (Reuters) - Two of
Europe's top three remaining telecommunications equipment companies,
Nokia Networks <NOK1V.HE> and Alcatel-Lucent <ALUA.PA>, have revived
talks on a possible merger, Germany's Manager Magazin reported on
Thursday, citing company sources.
The two companies could agree to merge or strike up a close
cooperation, the magazine said, adding that the contacts had resumed
in the autumn.
Shares in Alcatel rose 8 percent following the report. Nokia was up
Both Alcatel and Nokia declined to comment on the report.
Alcatel-Lucent and Nokia have held on-again, off-again talks for
years before Nokia sold its struggling handset business in April to
Microsoft in a 5.6 billion euro ($7 billion) deal that left Nokia to
concentrate on developing the networks business.
"The old rumour comes back to the table," Inderes Equity Research
analyst Mikael Rautanen said in reaction to the report. "The
pressure for the market to consolidate is obvious."
The Manager Magazin article said that Nokia, with its strength in
wireless networks, could benefit from a tie-up with Alcatel-Lucent,
with its fixed-line network assets, as distinctions blur between
wired and wireless networks in a mobile broadband world.
Nokia is looking for a modest return to growth in its core network
equipment and services business next year, while Alcatel has
remained focused on restructuring and cost-cutting as well as
generating cash to cut its debt payments.
One source familiar with the matter said merger talks between the
two have never really stopped over the last five years. But any deal
is likely to be hampered by French politics, with the threat of
Alcatel job cuts - possibly as high as 15,000 - far more than
lawmakers could bear, the source said.
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Rautanen, the Finnish analyst, said there were many hurdles to a
successful deal, starting with the fact that 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.
Nokia has the cash following the Microsoft deal to contemplate
buying Alcatel-Lucent and a deal would help bolster its position in
the U.S. market, he noted. But Nokia could simply end up buying
market share unless there was a deeper strategy, the analyst said.
"One should remember that mergers in this sector have a poor success
history, they are very risky," Rautanen said.
(Reporting By Eric Auchard; Editing by Vincent Baby)
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