Nokia Oyj is in advanced negotiations to acquire part of Alcatel-Lucent SA to strengthen its telecommunications-equipment business and better compete with Ericsson AB, according to people familiar with the matter.
Espoo, Finland-based Nokia may announce an agreement to buy Alcatel’s wireless assets as early as this week, the people said, asking not to be identified because the discussions are private. While a full takeover of Alcatel has also been examined, a purchase of the wireless unit remains the most likely scenario, the people said. No agreement has been reached and a deal could still fall apart, they said.
The business had 2014 revenue of 4.7 billion euros ($5 billion), accounting for 36 percent of Paris-based Alcatel’s total sales.
Nokia executives are seeking to secure French state backing for a sale of the assets, said one of the people. Any deal would need a green light from President Francois Hollande’s government, which has previously tried to block corporate mergers in the country. French government officials are working with advisers on a transaction that would protect some domestic research jobs, the people said.
Representatives for Nokia and Alcatel declined to comment on the talks.
Alcatel shares rose 11 percent to $4.48 at 2:55 p.m. in U.S. trading, giving the company a market value of $12.5 billion. Nokia climbed 3.1 percent to $8.31 for a market capitalization of $30.6 billion.
Both stocks jumped for a second day in European trading after Bloomberg News reported on Friday that Nokia is exploring a sale of its maps business known as HERE. Bids are expected soon for the unit, which is valued by Nokia at about 2 billion euros and has attracted interest from companies and private-equity firms, people familiar with the matter said.
The planned disposal of HERE has led analysts to speculate that the proceeds could be used to help pay for acquisitions.
By purchasing Alcatel’s wireless assets, Nokia Chief Executive Officer Rajeev Suri would bolster the Finnish supplier’s position in China, a market with some 1.3 billion mobile subscribers, and take on some contracts with the two biggest U.S. carriers -- Verizon Communications Inc. and AT&T Inc.
Consolidation has dominated conversations in the network-equipment industry for at least the past five years, as price wars dragged profits down and carriers reduce spending on infrastructure amid sluggish revenue. Suri and Alcatel CEO Michel Combes have eliminated jobs and focused on more profitable contracts.
Talks between Nokia and Alcatel have been on and off in the past. Les Echos reported today that negotiations have intensified in recent weeks.
Alcatel shares have more than tripled in the past two years as the company underwent a restructuring. Nokia has more than doubled since it agreed to sell its mobile-phone business to Microsoft Corp. in 2013 for about $7.5 billion. Nokia’s 5 billion euros in net cash can also help the Finnish company finance any transaction.
Under Combes, Alcatel has pushed to sell more equipment to the likes of Google Inc. and Amazon.com Inc. and become less reliant on carriers. It has reinforced product offerings for landline networks, from routers to a variety of equipment used in services such as cloud computing.