Alcatel, Lucent again talk marriage 'of equals'

24th March 2006, Comments 0 comments

PARIS, March 24, 2006 (AFP) - French telecom technology provider Alcatel and US equipment firm Lucent Technologies, both recovered from the Internet bubble, said Friday they were pondering a marriage creating a 33-billion-dollar giant.

PARIS, March 24, 2006 (AFP) - French telecom technology provider Alcatel and US equipment firm Lucent Technologies, both recovered from the Internet bubble, said Friday they were pondering a marriage creating a 33-billion-dollar giant.

The two are highly complementary, engaged in similar activities providing equipment for fixed and mobile phones, and a merger would create a world  leader in telecommunications at a time of widespread consolidation among  operators.

An earlier merger attempt failed in 2001.

The two said in a statement they had started negotiations for a merger "between equals", although Alcatel is half as big again as Lucent by  capitalisation.

The specialist institute IDATE said that a fusion would create the world's second-biggest maker of equipment and networks for telephones and the  Internet, almost equal with top producer Cisco Systems.

With Alcatel worth about US $20 billion and Lucent slightly less than US $13 billion dollars, the combined capitalisation would be near US $33 billion  dollars (EUR 27.5 billion).

In a brief joint statement, they said: "We can confirm that Lucent and Alcatel are engaged in discussions about a potential merger of equals that is  intended to be priced at market."

But they warned the deal was by no means firm.

In Paris, the price of shares in Alcatel showed a gain of 2.02 percent to EUR 13.11 in early afternoon trading after having bounded as high as by 4.82 percent in early trading. The overall market as measured by the CAC 40 index gained only 0.33 percent.

Brokers Nomura commented: "The transaction would result in the creation of a company with annual sales of EUR 25 billion and offering a broad range  of needs both in terms of technology and geography."

Lucent would offer Alcatel infrastructure for the CDMA mobile-telephone  transmission standard used in the United States and "very strong services  activities" and "world-wide research", Nomura said.

The telecommunications sector has been awash in consolidation deals lately.  US giant AT&T is gradually regaining its status prior to the 1984  dismantlement of its monopoly. After its recent takeover of SBC Communications  Inc., this month it announced plans to buy BellSouth for US $67 billion.

The equipment-making arm of AT&T that broke off and became independent in 1996, Lucent grew rapidly in the late 1990s until the technology bubble burst in 2002, when it almost went bankrupt. It has survived through thousands of layoffs and drastic budget cuts.

In fiscal 2004, which ended September 30 2005, Lucent saw its net income slide 40.7 percent to US $1.19 billion with a 4.4 percent growth in sales to US $9.44 billion.

Alcatel recorded a 61-percent increase in net profit for 2005 to EUR 930 million, based on a 7.3 percent increase in sales to EUR 13.1 billion. Its strengths are its digital subscriber lines (DSL) and Internet Provider (IP) solutions.

Alcatel was also hard hit by the bursting of the Internet and high-tech bubble.

Sources close to latest negotiations said the project was not identical to that of 2001:

"In 2001, we were still in the euphoria of the Internet bull market. Times have changed and the context is different."

Both companies offer triple play and quadruple play systems for the Internet, telephones both fixed and mobile, and television, and are also working on new ideas on network renewal.

One difference is that Alcatel is into artificial satellites.

Another difference prompting merger interest is that Lucent is active mainly on the US market whereas Alcatel is in various European and Asian  markets.

Julien Salanave of IDATE said the latest projected merger would indicate a speeding up of concentration in the industry. But in the case of Alcatel and Lucent, "the only industrial logic would be via cost synergies and  restructuring."

The Paris market welcomed the news despite doubts of analysts who foresaw the possibility of another failed merger attempt and risks entailed in  integrating two such rivals.

"We don't think a merger would create much synergy in terms of turnover and cost savings and risk being upset by political considerations," said  specialists at broker Dresdner Kleinwort Wasserstein.

Analysts also foresee possible national security problems. Both operate in the strategic sector, especially Alcatel in artificial satellites and defence  through a 9.45-percent stake in Thales.

Copyright AFP

Subject: French news

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