Nokia offloads subsea unit for €350m

• Nokia has been looking to get rid of its subsea business, Alcatel Submarine Networks
• It has agreed a sale with the French state for €350m
• The vendor is bullish that this will unlock growth opportunities in its core markets

Nokia is to exit the submarine networks market with the sale of its Alcatel Submarine Networks (ASN) business to the French state for €350m, as it aims to boost its profitability by focusing on its core network infrastructure assets.

In a statement, Nokia said it has entered into a put option to sell ASN to the French government, represented by the Agence des participations de l’Etat (APE). The deal, which is yet to be discussed with trade unions representing ASN and Nokia, will see the vendor retain a 20% stake and a board seat until “targeted exit” when the French state would take full ownership of ASN.

Nokia described ASN as a “non-core standalone business” and explained that its divestment means the company can “focus its Network Infrastructure portfolio on growth opportunities in its core markets and further improve profitability of the Network Infrastructure business group”.

Following the sale, which is expected to be finalised towards the end of 2024 or the beginning of 2025, Nokia’s Network Infrastructure business will comprise three units: Fixed Networks, IP Networks and Optical Networks.

And while the vendor expects to take a €1bn hit in terms of reduced net sales, it is bullish that the ASN sale will increase its operating profit margin by 100-150 basis points, and will not affect the financial outlook in its first-quarter financials.

According to Nokia, the French state is “the most relevant custodian of ASN” as it will act as “a stable owner with a long-term interest in the operation and maintenance of critical infrastructure”, as well as give “its full support for ASN’s management and strategy”, and maintain investment in the business and to support further sustainable development of its vertically integrated technology offering.

The sale agreement comes at a time when the subsea cable market is “large and attractive”, driven by heightened demand and importance of submarine cables.

Pekka Lundmark, Nokia’s president and CEO, said, ASN has “a strong market position” after undergoing “a significant transformation in recent years.” He added that the divestment allows Nokia’s Network Infrastructure business to “benefit from a streamlined portfolio with a focus on growth and strengthening its technology leadership.”

In November 2016, Nokia acquired Alcatel-Lucent. Since then, it has tried to sell ASN but was unable to find a buyer: Preliminary talks with Ekinops, a French developer of optical, routing and software products, collapsed in April 2019. ASN has been a low-margin business for Nokia, dragging down the overall performance of the vendor’s Network Infrastructure division, at a time marked by financial struggles, cost reductions and job cuts – see Nokia to cut up to 14,000 jobs as sales slump.

- Yanitsa Boyadzhieva, Deputy Editor, TelecomTV