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How Nokia’s Divestiture of ASN Could Affect Its Bottom Line

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Unit valued at $870 million

Nokia (NOK) is carrying out a strategic review of its undersea cable operation known as Alcatel Submarine Networks (or ASN), according to Reuters. Nokia is considering selling ASN.

Nokia got ahold of ASN through its $17.0 billion acquisition of French rival Alcatel-Lucent. ASN is estimated to be worth $870.0 million.

Selling ASN would unlock funds for Nokia to invest in growth in more strategic operations, such as its core networks business. Nokia acquired Alcatel to bolster its competition in the networks business, where it competes with Ericsson (ERIC), Cisco (CSCO), and Juniper Networks (JNPR).

Divesting ASN could strengthen Nokia’s balance sheet by contributing a cash injection and providing savings on the costs related to maintaining undersea cable networks.

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Forgoing an $8 billion opportunity

However, selling ASN would also mean Nokia’s losing out on the more than $8.0 billion in spending on new cable deployments expected over the next few years. 

According to Reuters, which cited research company TeleGeography, more than $8.1 billion will be spent on new cable network buildouts in the next three years, implying a potentially lucrative business opportunity for ASN due to its market leadership.

ASN controls 47% of the submarine cable network

With more than 580,000 kilometers of undersea cable network to its name, ASN is the world’s leading undersea cable provider with a ~47.0% share of the market, according to research company Terabit Consulting. ASN’s rivals include Ericsson, Huawei, NEC, Fujitsu, and TE SubCom, a subsidiary of TE Connectivity (TEL).

The above chart shows how ASN compares with its rivals on the basis of market share.

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