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Friday 9 December 2016

Alcatel-Lucent defends €15.6bn Nokia deal

Published 07/05/2015 | 07:54

Nokia Oyj is in talks to buy smaller telecom equipment maker Alcatel-Lucent, a deal that would combine the industry's two weakest players but could pose challenges in cutting costs and overcoming political opposition. Photo: Reuters
Nokia Oyj is in talks to buy smaller telecom equipment maker Alcatel-Lucent, a deal that would combine the industry's two weakest players but could pose challenges in cutting costs and overcoming political opposition. Photo: Reuters

Telecom equipment maker Alcatel-Lucent, which is set to be bought by larger rival Nokia for €15.6bn, improved profit margins in the first quarter despite a marked slowdown in its biggest market, the United States.

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Higher software sales and strong demand for its Internet routing products, which help telecom operators handle heavy broadband traffic from online video, helped Alcatel-Lucent post a better quarter than its soon-to-be buyer Nokia and mobile market leader Ericsson.

Both those competitors saw steep drops in their shares after missing profit targets, and Nokia's misstep prompted some Alcatel shareholders to say the takeover deal terms should be renegotiated.

Chief Executive Michel Combes dismissed the idea, saying there was no need to change the deal since both groups were sticking to their annual targets.

"The strategic rationale of the deal does not depend on the performance of an isolated quarter," he said.

"There is no reason for any change."

Nokia's acquisition of Alcatel-Lucent aims to position the company to better compete with Sweden's Ericsson as well as low-cost Chinese powerhouse Huawei by forging a strong number two in mobile with a more complete product line.

Alcatel-Lucent shareholders will get 0.55 shares in Nokia for every Alcatel-Lucent share, ending up with 33.5 percent of the enlarged group once the deal closes in mid-2016.

Reuters

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