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Nokia may have sold its mobile phone division to Microsoft, but the company remains very much active. It has shifted focus to telecommunications equipment and has announced plans to acquire French networking specialist Alcatel‑Lucent for €15.6 billion (approximately $16.6 billion).
For context, Microsoft purchased Nokia’s phone business for $7 billion — less than half of what Nokia is proposing to spend on Alcatel‑Lucent. Such a substantial investment suggests Nokia expects significant returns in the coming years.
The telecommunications industry is at a disruptive and transformative moment driven by 5G, the Internet of Things (IoT), connected vehicles, and advances in broadband. These trends create opportunities for companies that can lead in innovation and scale.
Our constant aim is to push the limits of what is possible
In the race to develop 5G, the final standards and architectures are still evolving. That uncertainty means early leaders could secure strong competitive advantages. Alcatel‑Lucent holds valuable patents and technologies that may influence how 5G and related systems are defined.
Beyond intellectual property, scale matters. Acquiring Alcatel‑Lucent would strengthen Nokia’s ability to compete with major rivals like Huawei and Ericsson. Nokia has also confirmed it is exploring the sale of HERE maps, reinforcing the impression that the company envisions its future primarily in networking and infrastructure rather than consumer devices.
Part of Alcatel‑Lucent is the storied Bell Laboratories, renowned for decades of innovation. Last year, Bell Labs researchers demonstrated a record-setting internet transfer rate of 10 Gbps over conventional copper lines using an extension of G.fast technology called XG.fast, surpassing the previous record by more than eight times.
Marcus Weldon, President of Bell Labs, commented at the time: “Our constant aim is to push the limits of what is possible to ‘invent the future’ with breakthroughs that are 10 times better than are possible today — our demonstration of 10 Gbps over copper is a prime example.”
He added: “By pushing broadband technology to its limits, operators can explore how to deliver gigabit services over existing networks and help ensure ultra‑broadband access is as widely available and as affordable as possible.”
The transaction is not expected to be finalized until 2016, but discussions are evidently advanced enough for both companies to make the announcement public. Even if the firms agree terms, regulatory scrutiny from the European Union or intervention by the French government could complicate or delay the deal.
Nick Jones, Partner and Head of Technology and Telecoms at Cavendish Corporate Finance, noted: “Large mergers in this sector have a mixed track record — the Alcatel and Lucent merger itself serves as an unfortunate precedent. With the French state protecting domestic jobs, achieving cost synergies may be more difficult, although combining Nokia’s cash reserves with Alcatel’s debt could produce clearer financing benefits.”
He continued: “Integration will likely be challenging, so shareholders will hope that the combined scale and enhanced R&D capability will drive revenue growth by expanding the merged company’s addressable market.”
This acquisition, if completed, could reshape the competitive landscape of networking and telecom equipment. We will monitor developments closely and report further updates as they occur.
Do you think Nokia should acquire Alcatel‑Lucent? Share your thoughts in the comments.
To learn more about the Internet of Things, consider attending the IoT Tech Expo Europe event in London’s Olympia, December 2–3, 2015.