Nokia Oyj is in advanced talks to acquire Alcatel-Lucent SA in the Finnish telecommunications-equipment maker’s biggest-ever acquisition that could value the French rival at more than $13 billion.
The negotiations may lead to a takeover offer for Paris- based Alcatel, although there is no certainty an agreement can be reached, the companies said in statements Tuesday. Alcatel shares jumped as much as 18 percent in the French capital to the highest price in almost seven years. Nokia fell as much as 8.3 percent on the Helsinki exchange.
The combined entity would become the biggest maker of wireless-network equipment, overtaking Sweden’s Ericsson AB and Huawei Technologies Co. of China, according to IDC. The deal would let Chief Executive Officer Rajeev Suri bolster Nokia’s position in China, a market with about 1.3 billion mobile subscribers, and take on some contracts with the two biggest U.S. carriers -- Verizon Communications Inc. and AT&T Inc.
“It’s a real game changer,” said Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki. “They have a lot of work ahead, but Suri has a good background for this.”
Shares of Nokia lost 6.6 percent to 7.26 euros at 12:53 p.m. in Helsinki, after dropping as low as 7.13 euros. Alcatel advanced 12 percent to 4.33 euros in Paris, after rising as high as 4.57 euros.
Nokia executives are seeking to secure French state backing for a deal, a person familiar with the matter said. Any deal would need a green light from President Francois Hollande’s government, which has previously tried to block corporate mergers in the country.
The French government will pay attention to possible impact for jobs and operations at Alcatel’s French sites, a spokeswoman for the Economy Ministry said by phone. French officials are working with advisers on a transaction that would protect some domestic research jobs, people familiar with the matter said.
Qiao Yuhua, a spokeswoman for Alcatel-Lucent Shanghai Bell, declined to comment on how a deal would affect the Chinese network-equipment venture.
The takeover would also let Nokia add products used for transmitting landline and Internet traffic, giving it a more complete offering to sell to carriers as the amount of data traveling on networks increases with the popularity of Netflix and other video and music services.
In a response, Ericsson could seek to combine with Juniper Networks Inc., a maker of Internet routers with a market value of almost $10 billion, Nordea’s Sarkamies said.
Alexander Peterc, an analyst at Exane BNP Paribas, said Alcatel could be worth 4.50 euros per share in a sale, which would value the company’s equity at 12.7 billion euros ($13.4 billion).
A planned disposal of Nokia’s maps business, HERE, has led analysts to speculate that the proceeds could be used to help pay for acquisitions. Bloomberg News reported on Friday that Nokia is exploring a sale of HERE.
Ericsson is now the largest maker of wireless-network gear -- which includes equipment such as base stations and antennas that transmit mobile-phone calls and data -- with a market share of 25.7 percent in 2014, according to IDC. Huawei had 23.2 percent, Nokia 15.8 percent and Alcatel 11.4 percent share.
Nokia’s purchase of Alcatel may be the biggest in the industry since at least 1999, when Lucent Technologies Inc. bought Ascend Communications Inc. for about $21 billion, according to Bloomberg data. Depending on the final terms of the deal, it would also be comparable to the transaction that created today’s Alcatel: the French company’s purchase of Lucent in 2006 for $13.4 billion, according to Bloomberg data.
The deal would top Nokia’s record acquisition of map provider Navteq Corp. for about $8 billion in 2008, and would be the biggest-ever by a Finnish company.
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. In 2013, Nokia weighed options including a combination with Alcatel’s mobile-phone networks unit.
Alcatel shares have more than tripled since Combes became CEO in 2013 as he reduced costs and landed contracts from new customers. Combes has less than 8 months left of his three-year turnaround plan, aimed at making Alcatel profitable and helping it generate cash.
The company lost billions of dollars in the years following its merger with Lucent as its struggled to revive sales growth. At the time of the merger, the combined company had an aggregate market value of 30 billion euros.
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 a transaction.
--With assistance from Manuel Baigorri and Matthew Campbell in London, Naomi Kresge in Berlin, Jacqueline Simmons, Helene Fouquet and Francois de Beaupuy in Paris, Alex Sherman and Jeffrey McCracken in New York and Edmond Lococo in Beijing.