France Plays Nice With Nokia Bid for Family Jewel Alcatel

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Nokia in Advanced Talks to Buy Alcatel-Lucent

France is notorious for blocking takeovers of its so-called industrial jewels. Not with Alcatel-Lucent SA.

Over the last nine months, the government -- far from being a roadblock -- has actually been facilitating the deal, participating in talks to merge Nokia Oyj and Alcatel-Lucent in a manner than will preserve jobs in France.

Intense competition from Chinese telecommunications-equipment makers has brought a whiff of pragmatism to the corridors of power in France. The government’s newfound openness is an acknowledgment that Alcatel-Lucent would face an uphill battle to survive as a stand-alone company in a brutal market.

“It’s a good deal for Alcatel-Lucent because it’s a deal for the future,” Economy Minister Emmanuel Macron said Tuesday, after meeting with the chief executive officers of the two companies at the Elysee palace in Paris. “There was some restructuring of the company but it can’t face increasingly fierce international competition in terms of 5G and Chinese players such as Huawei and ZTE on its own.”

The French government will closely monitor any consequences the deal may have on jobs, and will seek to make sure the transaction helps build a viable European champion, the economy ministry said in a statement. President Francois Hollande is struggling with joblessness at close to a record high.

“We need a competitive industry and one that can invest massively in the future,” Hollande said on Tuesday in a speech about his goals for the country’s industrial sector in Figeac, southwestern France. “We need champions.”

Near Bankrupt

Alcatel lost billions of dollars in the years following its 2006 merger with Lucent as it struggled to revive sales.

“Two years ago, Alcatel-Lucent was almost bankrupt with only some intellectual property rights buying it some bank financing,” Macron said.

A Nokia-Alcatel-Lucent merger would create the world’s biggest maker of wireless-network equipment, overtaking Sweden’s Ericsson AB and China’s Huawei Technologies Co. according to IDC, a technology research firm.

“These are two companies that used to be stars, which have since gone through difficulties,” Louis Schweitzer, a French government adviser, said on BFM radio.

Nokia being from Finland, which is part of the euro area, is “probably a positive element,” Schweitzer said. “It’s not the same as a merger with a U.S. or U.K. entity.”

Interventionist History

France has had a history of intervention, calling assets “strategic” and seeking to block deals once they’ve already been negotiated.

This month, the country blocked a sale of Internet-video service Dailymotion to a Chinese investor. Vivendi SA, a French media company, then began exclusive talks to buy control of Dailymotion from Orange SA.

The government has inserted itself in other deals, trying to block them or getting buyers to change the terms of the transaction. It did that with General Electric Co.’s purchase of Alstom SA’s energy assets. In that deal the companies had kept the government out of the loop. The state learned of the secret negotiations after Bloomberg News was first to report them.

In contrast, the state was involved early on in talks about Alcatel-Lucent’s future.

“This was a deal worked on in concert with the company, which is very different from Alstom,” Macron said. “It’s also part of a European strategy for telecommunications and digital sovereignty.”

Palace Talks

While France doesn’t own a significant stake in Alcatel-Lucent -- one of its investment arms holds 3.25 percent according to data compiled by Bloomberg -- it’s concerned about what will happen to the approximately 7,000 people who work for the company in the country. The economy minister also called Alcatel-Lucent “an heir to France’s tradition of electronic know-how.”

Macron on Tuesday said Nokia may add jobs in France and that it will make the country its center for global research and development.

Discussions on the deal were held over the past few months at the Elysee palace and with Macron, a former Rothschild banker and M&A adviser to the president.

The minister, who took over a year ago from his outspoken predecessor Arnaud Montebourg, has shied away from publicity about a potential transaction, preferring to move like a banker rather than a politician.

Montebourg, an admirer of Louis XIV’s dirigiste finance minister, Jean-Baptiste Colbert, had followed a long tradition of French state intervention in business, making it a tool of political promotion.

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