(Bloomberg) — Nokia Oyj’s mobile network assets are attracting interest from interested parties including Samsung Electronics Co. as pressure mounts to find new growth opportunities in the troubled telecom equipment sector, people with knowledge said.
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The Finnish company has held talks with advisers about possible options for its mobile networks business, which has struggled for years to compete with larger rivals such as Huawei Technologies Co., the sources said. Nokia has considered a number of different scenarios, from selling part or all of the division to spinning it off or combining it with a rival, the sources said.
Deliberations are still in the early stages and there is no certainty that Nokia will decide to pursue a transaction. The entire unit could be worth about $10 billion, said the people, who asked not to be identified because the information is private.
Samsung has initially expressed interest in acquiring some Nokia assets as it seeks to gain scale in the radio access networks that connect mobile phones to telecoms infrastructure, the sources said. Any divestments could also attract interest from other rivals, the sources said.
Shares in Nokia rose 7.1% to €4.06 at 16:17 in Helsinki trading, after earlier rising as much as 8.1%, the biggest intraday gain since January. The shares have risen 33% this year, giving the company a market value of about €22.8 billion ($25.3 billion).
Chief Executive Officer Pekka Lundmark has been trying to turn Nokia around since he took over four years ago. While the 5G rollout started strongly, demand from telecom operators has slowed and the company has been looking for new businesses that are less dependent on carriers’ network expansions.
A Samsung representative declined to comment. A Nokia spokesman said it was committed to the success of its mobile networks business, which it said was “highly strategic” to the company.
“The company has made significant progress this year, both in adjusting its cost base and protecting our product roadmap, winning new deals with new customers and growing share with existing customers,” the spokesperson said. “Nokia is focused on ensuring that Mobile Networks is positioned to serve its customers by building the best performing networks, investing in its portfolio and creating value for Nokia’s shareholders.”
Nokia’s mobile networks division supplies base stations, radio technology and servers to wireless operators around the world. It generated about 44% of Nokia’s total revenue last year, making it the company’s largest segment, according to data compiled by Bloomberg. But the business has suffered as phone companies, particularly in Europe, postponed costly network upgrades.
Nokia, once the world’s largest mobile phone maker, eventually sold that business after losing market share to Apple Inc. and Samsung. It has since focused on making equipment for communications networks, including the gear that carries signals for mobile devices.
Western governments are increasingly concerned about Huawei’s dominance in the communications equipment sector and the lack of strong rivals. Washington has warned that Beijing could use the Chinese company’s networks for intelligence gathering, given the company’s successful deployment of its equipment around the world.
Combining Nokia’s mobile networks business with a rival could create a stronger business that can better compete in new technologies. Telecom operators have been frustrated by their limited choice of equipment suppliers. South Korea-based Samsung, best known for its smartphones and memory chips, is also a competitor in communications equipment, but lacks the scale to compete in that business with Huawei and Ericsson AB.
Nokia was hit particularly hard last year when U.S. operator AT&T Inc. announced it would partner with Sweden’s Ericsson as its sole supplier of mobile Open RAN equipment in a deal worth $14 billion. Nokia has been working to diversify its customer base and target new growth areas.
“We are the only company in the world outside of China that can provide all the key pieces of network infrastructure that are needed: the core network software, the transport network, all the optical connections and then both fixed broadband and mobile access networks,” Lundmark said in an interview with CNBC in July. “There is no one else.”
The company is seeing growth in its fixed networking division, which sells equipment to support fiber and cable technologies. Nokia agreed to acquire U.S.-based Infinera for $2.3 billion in June, taking a significant bet on the boom in artificial intelligence.
–With assistance from Vinicy Chan and Michelle F. Davis.
(Updates with stock movement in the fifth paragraph)
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