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Will Nokia Acquire Wireless Business of Alcatel-Lucent? (NOK)

Bloomberg recently reported that Nokia Networks, a division of division of Nokia Corporation (ADR) (NYSE:NOK) is in advanced stage of negotiations with Alcatel-Lucent SA (ADR) (NYSE:ALU) to acquire the wireless assets of the latter. The report also hints at a full takeover of Alcatel-Lucent by Nokia, confirming the rumor which had been making the rounds since 2013.

Acquisition of the wireless business of Alcatel-Lucent will significantly strengthened Nokia Networks’ foothold in North America. The top U.S. telecom operators, namely, Verizon Communications and AT&T are major customers of Alcatel-Lucent.

Notably, in 2014, the wireless division of Alcatel-Lucent generated around $5 billion in sales. Out of this, Verizon and AT&T constituted more than 25%. Additionally, Alcatel-Lucent has a strong presence in China while Nokia Networks enjoys considerable dominance in Europe and Asia.

Over the last 3 years, Nokia has been restructuring is business model. In 2013, the company sold its mobile handset devices and services segment to Microsoft Corporation (NASDAQ:MSFT) for $7.2 billion. The company is currently mulling over the disinvestment of its network maps business (HERE) for approximately $2.11 billion. The proceeds of these sales will be used for the purchase of the wireless assets of Alcatel-Lucent.

If the takeover succeeds, then Nokia Networks will become a formidable player in the global telecom equipment gear manufacturing sector capable of competing with large peers like Ericsson (ADR) (NASDAQ:ERIC) and Huawei Technologies.

A full takeover of Alcatel-Lucent by Nokia will create a network solutions behemoth in the industry with a significant global customer base and solid operational efficiencies. Nokia Networks boasts strong technical efficiency in professional managed services, customer experience management together with a rich portfolio of mobile broadband infrastructure and 4G LTE networks.

On the other hand, Alcatel-Lucent has a relative advantage in IP-based products, optical networking, cloud computing/software-defined networking, fixed broadband network and professional services.

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