"Nokia and Alcatel-Lucent confirm that they are in advanced discussions with respect to a potential full merger, which would take the form of a public exchange offer by Nokia for Alcatel-Lucent," the company said in a statement.     

"There can be no certainty at this stage that these discussions will result in any agreement or transaction," it added.

The announcement came a day after reports that Nokia was in talks to acquire Alcatel-Lucent's wireless infrastructure.     

Rumours have swirled since December of a possible deal between the two firms, with media reporting on Monday that executives had been in negotiations since January.

The purchase would represent a significant boost in market share for Nokia. The Alcatel-Lucent wireless infrastructure unit alone accounted for 36 percent of total sales for the Paris-based company in 2014, according to media, generating 4.7 billion euros (USD 5 billion) in revenue.

The deal would help Nokia bolster its mobile infrastructure business against Swedish arch-rival Ericsson, profiting from Alcatel's position as a leading supplier of 4G and LTE mobile networks and related services.

But the Finnish market did not welcome Tuesday's news. In Helsinki, the Nokia share was down by 6.32 percent an hour after the announcement.

On the Paris stock exchange however, the Alcatel-Lucent share shot up by 12.14 percent.

The Finnish company was the world's biggest mobile phone maker for more than a decade until it was overtaken by South Korea's Samsung in 2012.
In 2014, Nokia sold its mobile phone and tablet division to US software giant Microsoft. It has since then sat on most of the 5.4 billion euros made from that sale.

Nokia employs some 55,000 people worldwide, while Alcatel-Lucent employs almost 53,000.

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