Nokia At Centre Of Merger Speculation – Report

Nokia is at the centre of market speculation after a rise in its share price after a report suggested it is exploring its strategic options.

These strategic options include exploring potential asset sales or mergers, people familiar with the matter told Bloomberg.

It comes as Nokia faces pressure on its earnings due to fierce competition. It competes with the likes of Huawei, Ericsson, Cisco and Samsung in the 5G equipment sector for example.

Strategic options

It has had mixed success in the 5G sector. In the UK for example, three of the biggest mobile operators (EE, Vodafone, and Three) all opted to use Huawei equipment to build their 5G networks.

The only exception to this is O2, which has instead opted to use 5G equipment from Ericsson and Nokia.

All of this has put pressure on earnings at the firm.

Last month Nokia announced it would cut 180 jobs in Finland as it seeks to ramp up investment in 5G technologies and digitalisation.

The company has a staff of 6,000 people in the country.

Nokia of course is no longer a mobile phone player (HMD Global uses the Nokia brand for its phones), but it has interests in other sectors. Nokia recently halted legal action against carmaker Daimler as it sought to bring the company into mediation talks over a patent licensing dispute to do with self-driving cars.

But now according to Bloomberg, Nokia is working with advisers to consider alternatives ranging from potential asset sales to mergers. Other options include shifting investments and making balance-sheet adjustments, one of them reportedly said.

Deliberations are ongoing, and there’s no certainty they will lead to any transactions, the people said.

Espoo, Finland-based Nokia reportedly declined to comment on the report.

According to Bloomberg Nokia shares have lost roughly a third of their value over the past year before news of its deliberations. The stock rose 3 percent on Thursday.

There is speculation that one possibility could see Nokia combine with a competitor such as Ericsson AB or partnering in certain business areas.

US ownership?

The news about Nokia comes after US Attorney General William Barr earlier this month suggested that the United States and its allies take a ‘controlling stake’ in Ericsson and Nokia to counter Huawei.

Barr said the alignment could take place “through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies.”

“Putting our large market and financial muscle behind one or both of these firms would make it a far more formidable competitor and eliminate concerns over its staying power, or their staying power,” Barr was quoted as saying.

Nokia acquired its French rival Alcatel-Lucent in 2016, which helped to broaden its networking product portfolio.