All systems look go for Nokia’s proposed €15.6 billion ($17.1 billion) acquisition of Alcatel-Lucent, with both companies posting strong results Thursday morning despite cutthroat competition in the telco equipment market.
Citing growth in software sales and stringent cost controls, Finland-based Nokia swung to a profit of €352 million for its second quarter, up from a loss of €27 million for the same quarter last year.
AlcaLu’s second quarter good news came in the form of narrowed losses, with the French firm reporting a net loss of €54 million, down from a €298 million loss same period year prior. The company also reported second quarter positive free cash flow — for the first time since its formation in 2006 — of €65 million.
The results “represent a significant milestone for Alcatel-Lucent,” CEO Michel Combes said in a statement. “We can also report that progress towards the proposed combination with Nokia is well on track, in particular with regulatory approvals being secured in a number of jurisdictions.”
Anti-trust clearances for the deal have come through from the European Commission, Albania, Brazil, Canada, Colombia, Russia, and Serbia, Nokia said in a statement, adding that the U.S. anti-trust review period had also expired.
The massive tie-up, expected to close in the first half of 2016, remains subject to approval of Nokia shareholders. Although activist hedge fund Elliot Management made headlines last month when it disclosed control over 1.3 percent of AlcaLu stock, the deal appears to remain on track.
The combined companies would hold a 29 percent market share in mobile radio access network equipment, as measured by revenue, according to data from market research firm Dell’Oro Group (see chart below), posing a threat to telco equipment titan Ericsson.
Though Paris has reportedly voiced insistence that the AlcaLu’s France-based jobs receive protection from cuts after the merger, the deal seems certain to spur some amount of layoffs. “We expect the telecom infrastructure market to remain challenging,” Nokia CEO Rajeev Suri said in a statement. “We remain highly focused on reducing costs and improving efficiency in order to mitigate the impact of market conditions.”
Nokia stock was up as much as 6 percent in midday trading Thursday, with Alcatel-Lucent stock up as much as 5 percent.