Nokia shares rise on report of possible mergers, assets sales

(Reuters) – Shares in Nokia Oyj (NOKIA.HE) rose in a falling market on Thursday, after Bloomberg News reported that the Finnish telecom network equipment maker was considering asset sales and mergers.

FILE PHOTO: Visitors gather outside the Nokia booth at the Mobile World Congress in Barcelona, Spain, February 26, 2019. REUTERS/Sergio Perez/File Photo

JPMorgan analysts wrote in the wake of the report: “If exploring strategic options, only viable ones are a sale to an unrelated Tech company or asset sales.”

Shares in Nokia were 1.1% higher mid-day in Helsinki, while European technology shares index .SX8P was 2.1% lower.

A Mirabaud Securities trader said the Bloomberg report supported the stock, probably by triggering short covering.

The report said Nokia was considering strategic options and was working with advisers to consider potential asset sales and mergers, citing people familiar with the matter. It did not give details.

A source close to the company said there was no truth to the report. Nokia declined to comment.

Nokia’s Technologies unit, which manages the company’s wide patent portfolio, reported 2019 operating profit rising 3% from a year ago to 1.24 billion euros ($1.35 billion), while sales slipped 1% to 1.49 billion.

Nokia competes with Huawei and Ericsson (ERICb.ST) for orders for new 5G networks which are at the centre of a brewing technology war between United States and China.

New 5G technology is expected to host critical functions from driverless vehicles to military communications.

U.S. Attorney General William Barr said this month the United States and its allies should consider investing in Nokia and Ericsson to counter Huawei’s dominance in 5G technology, fuelling speculation of merger and acquisition (M&A) activities.

The mobile telecom network industry has consolidated heavily in the past decade, with Nokia buying out Siemens from a venture and acquiring Alcatel-Lucent, leaving just three global players.

Large telecom operators see three vendors as a bare minimum for keeping competition alive in the industry. They typically try to use several vendors for their networks.

In October, Nokia slashed its 2019 and 2020 profit outlook and halted dividend payouts, saying profits would come under pressure as the company increased investments in 5G technology.

Reporting by Tarmo Virki @virki; Additional reporting by Josephine Mason and Boleslaw Lasocki; editing by David Evans

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