France takes control of Alcatel underwater data cables

The affair had become a sea snake. For years, the French government has tried to keep Alcatel Submarine Networks (ASN) under its control Now it’s a done deal. On Wednesday night, Bruno Le Maire, French Minister of Economy and Finance, signed an offer to buy 80 percent of the submarine cable champion from Nokia. The Finnish telecommunications equipment giant wanted to sell the business, which it acquired when it bought Alcatel in 2015.

Bercy states that the agreement should be completed by the end of the current year. ASN will then come under the control of the Agence des participations de l’Etat (APE). The agreement was signed on the basis of an enterprise value of 350 million euros. Nokia will remain a 20 percent minority shareholder in ASN upon completion of the agreement. However, under the terms of the agreement, the French government will have the option to increase its stake to 100 percent at a later date. On Thursday morning, Bercy was unable to specify the exact amount that would be paid for this acquisition. So Paris is moving forward in its process of nationalizing strategic national assets.

Cables vital to the global Internet

This acquisition ends a very, very long telenovela. Ever since Nokia’s acquisition of Alcatel, the government has had a say in any sale of ASNs. And for good reason: this business is as strategic as it is sensitive. ASN is one of the world’s three leaders in underwater telecommunications cables. This infrastructure, which carries 99 percent of intercontinental digital traffic, is the very foundation of the global Internet. These fiber-optic highways have always been in the crosshairs of the military and spies. It was unthinkable for France, for sovereignty reasons, to lose control of this business.

In recent years, Nokia has made numerous attempts to sell ASN. Several scenarios were considered. There was the possibility of a takeover by the French company Ekinops or a tie-up with the incumbent operator Orange. But the negotiations failed each time. In 2019, Nokia finally decided to keep this nugget. But according to Bercy, the Finnish group, currently undergoing restructuring due to a difficult economic situation, decided about a year ago to sell it. Its management presented several potential buyers to the government. But none of the possible buyers were okay for the French government.

Nokia does not want to abandon Alcatel Submarine Networks.

Bercy justifies this purchase with the “eminently strategic” nature of ASN. Today, submarine cable projects are mushrooming around the world. In addition to the telecom operators who need them to carry their traffic, the Gafams are investing billions in this essential infrastructure to connect their data centers and sell their digital services. Above all, “these undersea cables are vulnerable to attack,” as Bercy points out, emphasizing the great advantage of having the ability to manufacture cables, lay them, and maintain them with specialized ships.

With this acquisition, the government also wants to ensure that ASN retains its world-renowned leadership and expertise. “There was a risk that, over time, the company would no longer receive the managerial attention it needs and would suffer from a lack of investment” from Nokia, Bercy explains. In such a scenario, this could have led to a gradual downgrade. That said, ASN, which has about 1,000 employees and a large plant in Calais, is currently experiencing strong growth. As of 2019, its sales have doubled to more than 1 billion euros. To justify this sale, Nokia claims that ASN was an “autonomous and non-core” activity compared to its core business, which is based on the development of mobile technologies such as 5G.

Submarine cables are vital highways for global Internet

This agreement and the timing of its announcement come at an opportune time for the government. Indeed, just days before the general election, the agreement represents an opportunity for the executive to communicate its determination to do everything possible to preserve France’s industrial and technological sovereignty. For more than 20 years, Emmanuel Macron and his predecessors have been harshly criticized in this regard. From Rio Tinto’s acquisition of Alcan to Mittal’s takeover of Arcelor, from Nokia’s acquisition of Alcatel to the sale of Alstom Power to General Electric, the flagships of French industry have come under foreign flags in recent years. The takeover of ASN and last month’s acquisition of General Electric’s nuclear assets by EDF are examples of the government’s new policy of protecting the country’s most strategic interests.