Nokia plotted an exit from a submarine cable business by lining up a sale to the French government, a move which will cost it around €1 billion in reduced revenue for its Network Infrastructure business, but ultimately improve profitability.

The vendor agreed a put option covering Alcatel Submarine Networks (ASN) with the view of divesting its holding for an enterprise value of €350 million.

Nokia noted it is yet to discuss the move with unions, but anticipates holding a 20 per cent stake and a place on the board until an agreed point when the French state would assume full ownership.

Nokia will begin booking ASN as a discontinued operation in the current calendar quarter, predicting the hit to the Network Infrastructure division’s sales to be offset by a profit margin boost in the range of 100 to 150 basis points. It emphasised the move “does not impact” a financial forecast given when it issued Q1 earnings in April.

Once the sale is completed, Nokia stated its Network Infrastructure business will comprise Fixed Networks; IP Networks; and Optical Networks. It explained the move will enable it to focus the division “on growth opportunities” in core markets and “improve profitability”.

Nokia concluded France was the best choice to take on ASN due to providing stable ownership and having a “long-term interest in the operation and maintenance of critical infrastructure”.

It added the French state had “made clear its full support for ASN’s management and strategy”, along with agreeing to maintain investment in the business and back “further sustainable development of its vertically integrated technology offering”.

Nokia expects to close the sale at the end of this year or early 2025, “subject to formal consultation of ASN’s French Works Council and other customary closing conditions and regulatory approvals”.