Nokia warns of 'compliance issues' at Alcatel-Lucent business

Hannah Boland
Shares in Nokia slumped more than 6pc on the news on Friday - MARKKU OJALA

Nokia has warned that there may be "compliance issues" at a French company that it acquired three years ago for €15.6bn (£13.4bn). 

The Finnish firm said it is "scrutinising" transactions made by Paris-based Alcatel-Lucent and it is in touch with regulatory bodies over its internal investigation, which is currently at a "relatively early stage".

Nokia bought Alcatel-Lucent, a telecommunications equipment company, in 2016 in a move that helped it push ahead as one of the leading network equipment makers. 

In documents filed to the US Securities & Exchange Commission, Nokia said that resolution of the matter "could result in potential criminal or civil penalties, including the possibility of monetary fines, which could have a material adverse effect on our business, brand, reputation or financial position". 

It later clarified by saying the probe was not expected to have a material impact on the company, and that it had seen "no evidence" so far that would suggest any criminal penalties would apply in this case. 

Shares in Nokia slumped more than 6pc on the news on Friday. 

The company declined to elaborate on what the transactions relate to but said that it became aware of the issues during the course of its integration process.

At the time of the acquisition, some analysts had suggested integration would prove tricky, with Danske Capital's Juha Varis calling it a "difficult task". "It will easily take a year or two, and the management group must focus on it heavily," he said.

The deal was also met with some scepticism among Nokia shareholders who were wary after the struggle to merge Alcatel and Lucent in 2006. 

Since the acquisition, market conditions have been tougher for Nokia, amid slowing demand for 4G, as mobile operators prepare to spend on 5G instead.

However, there have recently been signs that things are improving. In January, whilst Nokia warned it was likely to see a soft start to 2019, it said it should have a "much more robust second half" of the year as the new cycle of network upgrades kicks in.