By Simon Zekaria

LONDON--A marriage between Finland's Nokia Corp. and French rival Alcatel-Lucent SA could create the world's largest telecommunications-equipment giant, at least by revenue, and shrink the number of suppliers to global telecoms providers.

Still, analysts said that despite a highly concentrated market for telecom gear, suppliers haven't been able to flex pricing-power muscle lately. And a combined Nokia and Alcatel could provide a rival about the same size as industry leaders Ericsson and Huawei Technologies Co., and actually pressure prices as all three compete for each other's customers.

"It is an intensely competitive sector," said Rick Mattila, an analyst at Mitsubishi UFJ Group. Huawei, a relative new comer, has been pressuring prices in recent years. In addition to the industry's "Big Four," a handful of relatively small Asian gear makers also compete for customers.

On Tuesday, Nokia said it was in advanced talks to buy Alcatel in a deal that, if it goes through, would create a European equipment giant with a combined market value of $40 billion at current prices. Combined revenue for the two companies in 2014 was about $27 billion, edging out rivals Ericsson and Huawei in terms of sales last year.

A ramped-up Nokia could compete head-on with Ericsson and Huawei for carrier customers. All three build and sell infrastructure such as cellphone masts, towers and relay stations at a time when technological advances and consumer demand for more data on their smartphones and other devices have triggered massive investment in network infrastructure by carriers.

Consolidation could also cut costs out of research and development, which may filter down to the price a merged company could afford to offer.

"It could be a good thing" for carriers, said Sylvain Fabre, an analyst at research firm Gartner.

Still, even before the talks were disclosed, carrier executives have worried about having too few suppliers in the market. In the wireless sector, for instance, Ericsson, Huawei and Nokia already control 80% of the global market by revenue, according to Bernstein Securities. Alcatel-Lucent holds another 10% share.

Big European telecom carriers weren't talking about the merger talks early Tuesday. Representatives for Vodafone Group PLC, the world's second largest carrier by subscribers behind China Telecom Corp., declined to comment. U.K. fixed-line incumbent BT Group PLC, which is looking to complete a deal for mobile operator EE, also declined to comment.

A merger deal would be a way for Nokia to boost its share of the competitive and profitable U.S. wireless market. Alcatel-Lucent has roots there. The company was formed in 2006 with the merger of Alcatel and Lucent Technologies, which AT&T Inc. spun off. It maintains customer relationships with AT&T and Verizon Communications Inc. Huawei continues to have challenges in the U.S., where a 2012 congressional report recommended U.S. telecom carriers to avoid using the Chinese company's networking gear due to alleged national security risks. Huawei has denied the allegations.

Ericsson declined to comment on its competitors' activities, adding that it was focused on its own strategy. Orange also declined to comment.

Deutsche Telekom, Telefónica, AT&T, Huawei and Verizon weren't immediately available to comment Tuesday.

Write to Simon Zekaria at simon.zekaria@wsj.com

Access Investor Kit for China Telecom Corp. Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=CNE1000002V2

Access Investor Kit for Deutsche Telekom AG

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=DE0005557508

Access Investor Kit for Telefonica SA

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=ES0178430E18

Access Investor Kit for Nokia Oyj

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=FI0009000681

Access Investor Kit for Alcatel-Lucent SA

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000130007

Access Investor Kit for BT Group Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0030913577

Access Investor Kit for Vodafone Group Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00BH4HKS39

Access Investor Kit for LM Ericsson Telefon AB

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=SE0000108656

Access Investor Kit for Alcatel-Lucent SA

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0139043055

Access Investor Kit for BT Group Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US05577E1010

Access Investor Kit for China Telecom Corp. Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US1694261033

Access Investor Kit for Deutsche Telekom AG

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US2515661054

Access Investor Kit for LM Ericsson Telefon AB

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US2948216088

Access Investor Kit for Nokia Oyj

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US6549022043

Access Investor Kit for Telefonica SA

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US8793822086

Access Investor Kit for Verizon Communications, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US92343V1044

Access Investor Kit for Vodafone Group Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US92857W3088

Subscribe to WSJ: http://online.wsj.com?mod=djnwires