Nokia confirms intention to buy Alcatel-Lucent for $16.6 billion

(Image Credit: iStockPhoto/pixdeluxe)

Nokia might have sold its phone hardware business to Microsoft, but the company is still very much alive and well. The firm has doubled-down on its efforts in the telecoms equipment space and has announced its intention to acquire French equipment maker, Alcatel-Lucent, for 15.6 billion euros ($16.6 billion.)

For comparative purposes, Microsoft bought Nokia's phone arm for $7 billion. We're talking about less than half of what Nokia has splashed on Alcatel. For such an investment, the firm must be confident that they'll be seeing a significant return in the coming years...

We're in an exciting but disruptive moment in the industry fuelled by 5G, the Internet of Things, connected vehicles, and advancements in broadband technology.

Our constant aim is to push the limits of what is possible

In the 5G space, no-one yet knows what the final standard will look like. What this does mean is that the first to crack it will be in a very advantageous position. Alcatel-Lucent is sitting on a pile of important patents which could help define the technology.

On the other hand, it could simply be about scale. The acquisition of Alcatel-Lucent will help Nokia compete against the likes of Huawei and Ericsson. Nokia confirmed earlier today that it is looking to sell HERE maps, which further solidifies the rumour that Nokia can only see a future for its business in the networking space.

Part of Alcatel-Lucent is the famous Bell Laboratories who have a well-established history of innovation. Last year we reported that researchers at the lab had broke the previous internet speed record by over eight times with a transfer rate of 10 Gbps. This was achieved over conventional copper infrastructure using an extension of 'G.FAST' technology called 'XG.FAST'.

Marcus Weldon, President of Bell Labs, said 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 continued: "By pushing broadband technology to its limits, operators can determine how they could deliver gigabit services over their existing networks and ensure the availability of ultra-broadband access is as widely and as economically as possible.”

The deal isn't set to be reached until 2016, but talks between the two companies are clearly far enough along to go public with the announcement. Even if the two come to an agreement, however, the EU or French government might attempt to step-in and disrupt the relationship...

Nick Jones, Partner and Head of Technology and Telecoms at Cavendish Corporate Finance, said: “The track record of large mergers in the sector hasn’t been great - the Alcatel and Lucent merger itself being an unfortunate comparable.  With the French state protecting French jobs there’s added difficulty to yielding cost synergies, although the pooling of Nokia cash with Alcatel debt will yield more obvious financing savings."

He continues: "With integration likely to be challenging, shareholders will hope that increased scale and R&D capability will drive revenue growth from an increased addressable market for the merged business.”

We'll be watching this story with close interest and will keep you updated with any further developments.

Do you think Nokia should acquire Alcatel-Lucent? Let us know in the comments.

To learn more about the Internet of Things visit IoT Tech Expo Europe in London's Olympia, December 2-3, 2015.

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