Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) announced on Thursday that it has struck a deal to buy Panasonic Corporation (ADR) (OTCMKTS:PCRFY) (TYO:6752)’s wireless networks business. JPMorgan analysts see this as helping Nokia increase its share of Japanese carrier DoCoMo’s business and potentially in Japan more generally.
Nokia, Panasonic don’t release details
Under the terms of the agreement, Nokia will buy Panasonic’s LTE and 3G wireless base station division and also the related wireless equipment system business. Panasonic will transfer the business contracts and fixed assets from these divisions over to Nokia Networks in Japan. Panasonic’s employees in those divisions are expected to go along to Nokia. Both companies expect to finish the agreement by the end of September and close the deal on Jan. 1.
The two companies did not release the financial details of the deal. Nikkei estimated in July that the deal could happen and estimated that the valuation could be in the tens of millions of dollars. As a result, it seems unlikely that Nokia paid a lot for the acquisition, according to JPMorgan analyst Sandeep Deshpande and the rest of the firm’s team. Nikkei reported that the business had approximately $197 million in sales in the fiscal year that ended in March 2013.
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In a report dated July 31, 2014, the analysts noted that Nokia is already one of the top three players in Japan’s mobile network equipment market. In 2012, the company ranked in second place with a 24.5% share. When specifically referring to NTT DoCoMo, however, they believe Nokia had a fairly low direct share. This is key because the carrier is Japan’s largest.
The analysts also note that Panasonic has been one of the carrier’s main base station suppliers for 3G and 4G equipment. The company has been reported to hold about a 9% share of the broader mobile infrastructure market in Japan. As a result, Nokia’s plan to buy this part of Panasonic’s business could not only increase its share of NTT DoCoMo’s business but also the overall Japanese market.
They also point out that Nokia and Panasonic have already been collaborating for about the last seven years to co-develop base stations for the Japanese carrier. They maintained their Overweight rating and €25 per share price target on Nokia.