Vendor convergence

(Last Updated On: April 3, 2006)

Having just written about the telco player convergence, leading to the new AT&T, it is indeed not surprising to learn about how Alcatel and Lucent have agreed to merge to form a major global player in telecommunications equipment. Given the rising interest in rolling out IP NGN aroung the world, this makes sense in its combined areas of strenght to hit to telcos with a one stop shop solution.

According to Serge Tchuruk, Chairman and CEO of Alcatel, this merger is expected to achieve approximately $1.7 billion in annual pretax costs synergies within 3 years, and combined revenues for CY05 of $25 billion, $11 billion of this being cash. The combined market cap of both companies is expected to be $36 billion. The stock for stock merger with leave Alcatel shareholders owning 60% and Lucent shareholders owning 40% of the combined entity.

According to Patricia Russo, Chair and CEO of Lucent, this combined entity will have the most experienced triple play vendor, offering unique end to end solutions. It will have a presence in all major carriers around the world, and it hopes to be a leader in IPTV, Mobile Video, NGN/IMS, and 3G (UMTS and CDMA). As carriers consolidate, it does seem to also made sense for vendors to consolidate to serve the bigger and converged services entities.

This deal is expected to close within the next 2 years, subject to regulatory, government and shareholder approval. It was discussed that the new entity will be incorporated in France with executive offices in Paris and North American Operating Headquarters and global Bell Labs headquarters in New Jersey. The non-executive Chairman has been disclosed as Serge Tchuruk and the CEO will be Patricia Russo, both operating out of Paris. 6 of Alcatel’s Board and 6 of Lucent’s Board, plus 2 new independent European Directors will serve as the Board. There is also expected to be a 10% reduction of the workforce worldwide.

Interesting indeed to watch – what’s next?