By Matt Ayres

Finnish telecommunications company Nokia is in talks to buy French rival Alcatel-Lucent, a deal that could create a new global telecoms equipment group worth over €40bn (£29bn).

In a joint announcement, the two companies said there could be "no certainty at this stage" that the discussions would result in a deal.

Alcatel-Lucent’s market capitalization is approximately €11 billion, while Nokia’s market capitalization is about €28 billion.

A merger for two of the industry's weaker players could pose competition to rivals such as Sweden’s Ericsson and China’s Huawei Technologies.

However, analysts and investors suggested the deal could face potential opposition from the French government, which is sensitive about any potential job cuts in the communications industry.