December 22, 2014

Speculation about Nokia-Alcatel-Lucent merger fuels stock increases

A major telecommunications equipment merger between Nokia Networks and Alcatel-Lucent could shake up the European market, according to reports that sent stock prices for both companies rising. A recent article published by Germany's Manager Magazin reported that the firms were in talks to merge, which would combine major industry footprints. 

For years Nokia and Alcatel-Lucent have flirted with the possibility of joining forces, though transactions with other companies have delayed the acquisition. Seen by some analysts as an "old rumor," the report cites sources inside the companies who say that it might finally come to fruition. Growing pressure to consolidate could tip the scales in favor of a merger, which has already excited investors. 

Nokia is valued at  €24.58 billion, up 3.32 percent following the Magazin's report. Alcatel-Lucent shares grew even more impressively, up 8.2 percent with an overall valuation of €8.09 billion. Earlier this year, Microsoft acquired Nokia's troubled handset business for €5.6 billion, a flush of capital that could help the company acquire Alcatel-Lucent. Reuters spoke to Inderes Equity Research analyst Mikael Rautanen to examine the prospect. 

"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," according to the report. "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."

With sights set on competition in the United States and around the world, a merger could perfectly situate the firms to do bigger business. For now, however, shareholders can benefit from the positive press.