Why Is Nokia Taking So Long to Decide Fate of ASN?
Nokia sought to sell ASN
Nokia (NOK) has not concluded the strategic review of its undersea cables business, known as Alcatel Submarine Networks, or ASN. Speaking at a conference recently, Nokia chief executive Rajeev Suri said that there were no updates to be issued regarding ASN because it is “still in the middle of [its] strategic review,” according to a Reuters report.
Nokia got its hands on ASN through its $17 billion acquisition of Alcatel-Lucent. ASN is a top supplier of undersea cable networks, and it is believed a sale could value it north of $900 million. Reuters reported back in May that Nokia was exploring the sale of its ASN business, but no deal has come forth since.
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Deciding fate of a crucial business becoming a challenge
Why is it taking so long for Nokia to decide the fate of its undersea cables division? Perhaps the answer to this question lies in how important this business is—to Nokia itself and the industry.
Nokia’s ASN unit is the world’s leading undersea cables provider, controlling roughly 47% of the market, according to estimates by research firm Terabit Consulting. So the undersea cables business is one area Nokia has a clear edge over its fierce rivals such as Europe-based (EFA) Ericsson (ERIC) and China-based Huawei. Ericsson and Huawei each control less than 3.0% of the world’s undersea cables network market.
Sale of ASN could see Nokia miss an $8.0-billion business
According to research firm TeleGeography, over $8.1 billion is expected to be spent on the deployment of new undersea cable networks over the next three years. Given ASN’s market leadership, this presents a potentially lucrative business opportunity. Perhaps this is another factor that could be causing Nokia to take its time to carefully explore the future of ASN.
Nevertheless, the sale of ASN would unlock funds for Nokia to invest in strategic acquisitions. It was recently rumored that Nokia was interested in acquiring Cisco Systems (CSCO) rival Juniper Networks (JNPR).