Standard & Poor’s upgrades Nokia and puts Alcatel-Lucent on positive watch
Was selling off its mobile manufacturing arm the best decision Nokia's management ever made? Following a generally positive reaction to its proposal to buy Alcatel-Lucent earlier this week, it's only gone and been upgraded by credit ratings agency Standard & Poor's…
In a statement today S&P said it was upgrading the Finnish former mobile manufacturer – now mobile equipment provider – from "BB" to "BB+" because of "solid operating results and free cash flow generation in 2014", as well as "resilient prospects for 2015". As a result, it raised its business risk assessment from "weak" to "fair".
A special mention was given to the €15.6bn Alcatel deal, announced on Wednesday (although heavily rumoured on Tuesday).
Despite being margin-dilutive and creating meaningful integration challenges in the near term, we view the proposed merger with French-American telecommunications equipment supplier Alcatel-Lucent overall as potentially credit-positive in the medium term.
At the same time, S&P issued a statement saying it was placing Alcatel itself on positive watch.
"As part of the transaction, we expect Alcatel-Lucent's outstanding convertible bonds will be converted into equity and exchanged with newly issued ordinary shares of Nokia," it added.
Once one of the world's largest mobile phone makers, Nokia finalised the deal to sell its ailing handset business for €5.4bn to Microsoft in April last year.
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