Nokia (NYSE:NOK) confirmed reports that it is in advanced talks to purchase rival Alcatel-Lucent (NYSE: ALU). The combined company would create a telecom power player better equipped to compete with market leader Ericsson (NASDAQ: ERIC) and Chinese rivals Huawei and ZTE.
In a statement, Nokia said that the deal, which is a potential "full combination" of the two firms, would take the form of a public exchange offer by Nokia for Alcatel-Lucent. The company also emphasized that there is "no certainty" that the deal will actually happen.
Nokia did not say how much it might pay for Alcatel-Lucent. The company currently has a market cap of about $27 billion. Last year, the company sold its handset business to Microsoft for $7.2 billion so it could focus solely on its equipment business. In the fourth quarter the Finnish company reported total sales of about $4.32 billion, a 9.4 percent increase.
Meanwhile, Alcatel-Lucent reported fourth-quarter 2014 sales of $4.2 billion. The company has been trying to differentiate itself from competitors like Ericsson and Nokia by seeking more opportunities for its IP router business. In addition, Alcatel-Lucent has recently focused on large enterprises as a way to broaden its customer base beyond the traditional service provider market.
Nokia has not been as much of a player in the wireline space since selling off its optical business to Marlin Equity Partners in 2012 and its access network division to Adtran in late 2011. The company sold those divisions so it could focus solely on its mobile broadband business.
An acquisition of Alcatel-Lucent, however, would bring Nokia back into the wireline business, particularly in North America, where Alcatel-Lucent recently inked a deal with Verizon (NYSE: VZ) to deploy the company's wavelength routing technology.
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