Nokia, Alcatel-Lucent confirm tie-up talks

Nokia and Alcatel-Lucent have confirmed they are in advanced talks regarding a potential merger to create the world's second-largest networking vendor.

In a joint statement, the companies revealed that the proposed merger would take the form of a public exchange offer for Alcatel-Lucent by Nokia.

Forbes reports that a merger would likely value Alcatel-Lucent at around $13 billion. The company had a market cap of $11.6 billion before word of the acquisition talks spread, compared to $30.6 billion for Nokia.

Based on 2014 figures, the proposed merger would create a company with annual revenues of $28.6 billion and market share of 16.9%, the New York Times said. This would position it as a true challenger to Ericsson, which had revenue of $29.9 billion and a market share of 17.7% in 2014.

A deal has the backing of the French government, although France's economic ministry has indicated it will be vigilant in ensuring it does not negatively impact employment activity at Alcatel-Lucent's French sites.

Nokia is meanwhile rumored to be considering selling its HERE mapping business to focus on networking operations, and may use the proceeds from such a sale to help fund the acquisition of Alcatel-Lucent.

Ovum chief research officer Mark Newman believes a merger could help Nokia fill some gaps in its portfolio where it is perceived to be lagging the competition. But he noticed that such a large merger creates risks associated with duplication of product portfolios.