Nokia and Alcatel-Lucent are in advanced merger talks, the companies confirmed Tuesday following media speculation that a deal was in the works.

The talks could still fall apart, but a deal is on the table in which Nokia would acquire Alcatel-Lucent in a stock swap, the companies said.

A merger would give the combined entity a broader product portfolio and greater scale, but would bring its own challenges.

It makes sense for Nokia, a mobile broadband specialist, to merge with Alcatel-Lucent, which has a strong position in fixed networks, according to Mark Newman, chief research officer of Ovum’s telecoms research business.

As mobile and fixed networks become increasingly integrated, not having the latter is becoming a disadvantage for Nokia, Newman said. The growing worldwide popularity of smartphones has increased the focus on mobile networks, but fixed broadband networks are still needed to deliver high-resolution video content and to provide backhaul for Wi-Fi networks in homes. The integration of Alcatel-Lucent’s fixed offering with the best parts of the two companies’ respective mobile offerings could in that regard be a boon for end-users, he said.

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