Lucent And Alcatel - Its Official

April 9, 2006 - source: BWCS

Two giants of the telecoms equipment world, Alcatel and Lucent have officially tied the knot this weekend. The terms of the nuptials are straight-forward, the French partner will buy out its US rival for US$13.4 billion (euros 11.1 billion) in stock. Together the pair plan to form an "an industry powerhouse" and between them the two should have a broad enough product line to satisfy even the fussiest of telecoms service providers.

The combined business, based in Paris, will end up around 10% lighter on the payroll (8,800 jobs) and will work to target what both partners see as fast-growing service sectors such as the converged triple-play offerings, broadband Internet, phone and TV. The new, yet-to-be named entity, will have sales of around US$25 billion (euros 21 billion) a year, which will make it larger than the Swedish giant Ericsson. The Stockholm-based rival currently boasts around US$19.9 billion in annual sales.

The Franco-American marriage has now been approved by both boards, just one week after the two companies announced they were in talks. Lucent shareowners will receive 0.1952 of an ADS (American Depositary Share) representing ordinary shares of Alcatel, for every common share of Lucent that they currently hold. Upon completion of the merger, Alcatel shareholders will own approximately 60% of the combined company and Lucent shareholders will hold around 40%.

The deal follows some quick-fire consolidation in the US telecoms sector. Over the past 12 months, SBC Communications has bought AT&T, Verizon agreed to take over MCI, and now the confusingly renamed AT&T Inc (the new SBC/AT&T combo) is proposing to bid US$67 billion for BellSouth. Where will it all end?