Alcatel, Lucent make merger plans official

Telecommunications vendors Alcatel and Lucent Technologies this week announced that they have entered into a definitive merger agreement to create a new company that will be a global leader in many telecom arenas.

The merger makes sense in an environment where carrier customers are consolidating and seeking vendors that can provide innovation and expertise in the many communications services—fixed and mobile voice, video and data—featured in provider bundles, Alcatel Chairman and CEO Serge Tchuruk said during a webcast yesterday.

Tchuruk said he believes the Alcatel-Lucent combination meets these criteria, as the combination will create a company with an aggregate market capitalization of $36 billion with huge portfolios of intellectual property and customers.

“We’ll be, by far, the number-one [vendor] in wireline, number-two in worldwide mobility and number-two in worldwide services,” Tchuruk said.

Indeed, the merged company will rank first or second in market share in most major technologies and will be a “clear leader in CDMA” wireless technolgies, said Lucent Chairman and CEO Patricia Russo. In addition to the company’s strength in embedded technology, it has the research & development foundation to lead the transition to all-IP networks featuring IP multimedia subsystem (IMS) architectures, she said.

“[IMS is] really the glue that will enable the next generation of converged services,” Russo said.

Within three years, the new company will realize about $1.7 billion in annual savings from synergies, which does not include “revenue upside” estimates created by the merger, Russo said. Some of these savings will be generated from a 10% workforce reduction, she said.

Subject to customary regulatory and governmental reviews, the “merger of equals” is expected to be completed within a year, Tchuruk said. Tchuruk will become non-executive chairman of the combined company, while Russo will be the CEO.

Executive offices of the combined company will be in Paris, with North American operations based in New Jersey, where Bell Labs will remain headquartered. The combined company will continue to be the industrial partner of two-way radio vendor Thales, according to a joint press release.