Regulators will be next challenge for Nokia Alcatel-Lucent deal

Nokia and Alcatel will need to convince regulators in nine countries including the US and China that their proposed tie-up will not impair competition in an already heavily consolidated telecoms equipment market.

Gaining approval for the deal in the US will be a key hurdle to overcome. With Chinese rivals such as Huawei locked out of the market, the acquisition will in effect leave only one other major provider of telecoms equipment alongside Ericsson.

"The attitude of the US carriers to the merger will be critical. Since the Chinese manufacturers are effectively barred from the American market, this is a three-to-two merger, with no reasonable expectation of viable new entrants," said analysts at Olivetree Securities.

Winning over Chinese regulators could also hold up the deal, with Nokia likely to be mindful that authorities in the country were responsible for delaying the sale of its handset business to Microsoft.

Once the deal is completed, Nokia would own Alcatel-Lucent's 50 per cent stake in Alcatel-Lucent Shanghai Bell alongside the Chinese state. Both Nokia and Alcatel have also been handed contracts over the past year to supply 4G equipment to China's three mobile groups.

Analysts believe that the European Commission may prove less of a problem, particularly as the deal is being presented as an attempt to create a European champion to challenge overseas rivals such as Huawei. Such an approach is likely to find favour among Brussels regulators seeking to strengthen the region's technology groups.

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At a press conference in Paris, Michel Combes, chief executive of Alcatel-Lucent, agreed. "I hope that Europe accompanies the development and strengthening a group such as Nokia, a European group and has roots in Europe. It is natural that the whole of European governments accompany a project of this type," he said.

Rajeev Suri, chief executive of Nokia, said he was confident the transaction would receive antitrust approval in the EU, China and the US, and the companies expect to have regulatory approval within a year. "We have plenty experience in doing that . . . we understand the process very well," he said.

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