Alcatel shares jump after announcement of deal with Lucent

Monday, April 3rd 2006, 9:29 am

By: News On 6

PARIS (AP) _ Alcatel SA's shares jumped 6 percent Monday following the weekend announcement of its $13.4 billion stock deal for Lucent Technologies Inc. that will create a powerhouse in a consolidating telecom industry.

The combined business, to be based in Paris, will work to capitalize on fast-growing offerings such as ``triple-play'' Internet, phone and TV packages that have become popular in the telecom field, the companies said in announcing the deal Sunday.

Alcatel shares rose 6 percent to 13.54 euros ($16.39) in midday trading in Paris. The company's U.S. headquarters are in Plano, Texas.

The new company _ whose new name is to be announced later _ will have annual sales of $25 billion) and an 18 percent share of the fiercely competitive market for telecom gear.

Company leaders said Sunday they plan to shed 10 percent of the combined work force _ about 8,800 jobs _ after the deal closes. No details were given about where the job cuts would be, but Lucent CEO Patricia Russo, who will head the combined company from Paris, pledged to ``take a fair and balanced approach.''

The new Alcatel-Lucent should be better equipped to weather both intense competition in the telecom equipment market and pricing pressures from larger telecom service providers emerging from a new wave of consolidation. The companies said the tie-up will generate annualized pretax savings of $1.7 billion within three years.

``Lucent was sooner or later going to have to do something to address the scale of their operations'' to stay competitive, said George Calhoun, a business and technology professor at Stevens Institute of Technology. He said Alcatel needed ``to become an A-list infrastructure company in the U.S. market.''

The deal comes as the industry's major U.S. customers have been rapidly consolidating the telecom field. In the past year, the former SBC Communications Inc. bought AT&T Corp., while Verizon Communications Inc. acquired MCI Inc. Last month, AT&T Inc. _ the name SBC chose after buying AT&T _ proposed a $67 billion deal for BellSouth Corp.

``The newly formed company will be a key player in several key telecom markets,'' including services and wireless network equipment, Prudential Equity Group analyst Inder Singh wrote in a research note.

With about one-third of revenues coming each from North America, Europe and Asia, he wrote, the new company will have a geographic reach few competitors could match, likely forcing other mergers.

Alcatel and Lucent, based in Murray Hill, N.J., had tried to combine once before, but talks ended without a deal in 2001. This time, Alcatel Chairman and CEO Serge Tchuruk said, it was ``the right time, the right solution, the right companies.''