Tuesday. 31.03.2020
El tiempo

Nokia is considering a merger with Ericsson and asset sales

The company's shares have lost a third of their value compared to 2019. A merger would allow to compete more effectively with the Chinese firm Huawei, but it could also destroy an important number of jobs.
Nokia is considering a merger with Ericsson and asset sales

Nokia Oyj, the Finnish telecommunications equipment company, is considering to sale some assets or even a merger with Swedish rival Ericsson AB, according to Bloomberg News service. That would make possible to compete more effectively with the Chinese firm Huawei Technologies.

Asset sales are a more sensible option. Merging Nokia and Ericsson could create as many difficulties as it would solve. Nokia has suffered 12 turbulent months. Partly because they have not been able to adequately incorporate Alcatel-Lucent SA, its last major acquisition. 

A combination with Ericsson could facilitate competing on price with Huawei, which nowadays takes advantage from the economies of scale supported by the Chinese market.

Jobs in danger

However, it could also take several years just to get regulatory approval and the Finnish Government, one of Nokia’s five-biggest shareholders through its Solidium Oy investment vehicle, would surely stand in the way of any merger that would destroy an important number of jobs.

That situation would benefit Huawei, which could make the most of the period of uncertainty to obtain new clients.

Chief Executive Officer Rajeev Suri has not been capable to benefit from the recent international problems of Huawei, and Nokia's shares have lost a third of their value in comparison to 2019. That makes it weaker to an approach from an activist investor scrutinizing businesses that are undervalued as part of the whole.

Comments