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One year on, Alcatel-Lucent's new CEO gives his vision for the industry's future [ICT Monitor Worldwide](ICT Monitor Worldwide Via Acquire Media NewsEdge) Michel Combes was not at Mobile World Congress a year ago. He had been appointed as the new CEO of Alcatel-Lucent just a day before the 2013 mobile fest started in Barcelona. "I did not show up," he says. He was too new. In any case — though he did not add this — his appointment as successor to Ben Verwaayen did not officially begin until 1 April, more than a month later. But that did not stop Alcatel-Lucent from proclaiming the message at the 2014 Mobile World Congress of "Alcatel-Lucent, one year later". One year, that is, since Combes was appointed to head the company. Lindsay Newell, vice president of portfolio marketing, introduced Combes at a press conference on the Sunday before MWC was officially under way with the words: "One year later, a very different Alcatel-Lucent. This is a very different company, a confident company." Verwaayen's name was not mentioned, by anyone. "We have accomplished quite a lot," says Combes, who was CEO of Vodafone's Europe region for four years from 2008. He left Vodafone with a plan to take up the leadership of Vivendi's telecoms unit, SFR, at the start of August 2012 — but the Vivendi group pushed out its CEO, Jean-Bernard Levy, and Combes did not start the SFR job. Incidentally, that prize went instead to Jean-Yves Charlier, former BT executive and later Colt CEO. But Vivendi is now considering competing bids for SFR, from rival mobile operator Bouygues and cable company Numericable, and Charlier's future in SFR remains to be seen. Meanwhile Combes was in limbo — or perhaps not. When Global Telecoms Business interviewed Verwaayen in the very first days of 2013, he seemed confident that — even though the company's financial performance has been disappointing — he wanted to see it through. "It is my long-term view that I am determined to go and fix this," Verwaayen told GTB in the last interview he gave anyone as CEO of Alcatel-Lucent. Within days of giving that interview, Verwaayen resigned. A few weeks later, Alcatel-Lucent announced the appointment of Combes to take over. Since then, "it is a new Alcatel-Lucent we are presenting", says Combes. The company is "stronger from the financial point of view". Liquidity issues Combes admits: "Some people have had doubts about the viability of the company. We have had some liquidity issues." Combes, during his years at Vodafone — and earlier as chairman and CEO of French transmission company TDF and later CFO and senior executive vice president of France Telecom — knew Alcatel-Lucent and its predecessor, Alcatel, as a customer. "I was a little bit puzzled about Alcatel-Lucent," he admits. "Maybe it was doing too many things." This was a common complaint about the group. While NSN, to take a particular example, was focusing on mobile broadband and offloading its fixed broadband activities, Alcatel-Lucent seemed to want to continue to do everything. "We are reshaping the company," says Combes now, identifying three main areas: IP routing and optics, cloud and ultra broadband access. These activities are "quite clearly defined", says Combes. "Existing customers are now back with us." And there are new customers, he adds. "We have reignited innovation." Bell Labs, once the glory of Ma Bell before the old AT&T was broken up in the late 1980s, became part of Lucent and then part of Alcatel-Lucent. It's hard to do innovation "when you don't have the financial resources", says Combes. The company has a €2.3 billion budget for research and development "and we are back on track for what we would like Alcatel to be". Yes, Alcatel, he said — a number of times. "In the long term we can start to generate the financial resources so we can reinvent the future. We all know what we have to do to regain leadership." So if Alcatel-Lucent is focusing on certain areas, what is it leaving behind? On this, Combes is less clear than he might be. "We spent a lot of resources on a mobile advertising platform," he says. "It appears we were not relevant." Accelerating transformation And the company is "accelerating the transformation from the legacy world to the new world". What does that mean? "Take wireless. We are embracing big time the new technologies of 4G. But 2G and 3G we will continue to support. We are reallocating resources on what we believe will be the drivers of the future, accelerating our resources from the legacy technologies to the new ones." He's shifting the focus in research and development, he says. "When I joined, 65% of R&D was focused on IP, the cloud, etcetera." That will go up to 73% in 2013 "and by 2015 the aim is 90%". Network functions virtualisation is at the top of his agenda. At Mobile World Congress Alcatel-Lucent announced a collaboration with Intel in virtualisation. Networks will develop in five major directions, says Combes, listing speed, integration between network and cloud, distributed architecture, user-aware networking and security as the five key factors. But he wants to focus on two particular changes, both involving the relationship between the network and the cloud. "Really what NFV is about is how cloud can contribute to the network and be much more agile and much more flexible." And software-defined networks will allow data centres to deliver a range of end-to-end services. Combes refers to Alcatel-Lucent's Nuage networks platform, "launched the day I joined the company", he says in a rare acknowledgement that some of the previous management's policies may have been right. The new partnership with Intel "is to accelerate NFV", he says. It is "about optimisation, virtualisation and leveraging the Intel architecture", along with "toolkits to accelerate and facilitate the transition from the legacy world to the new world". NFV is creating the "need to embrace the brand new world of an amazing acceleration of services", he says. This is "the only way" that service providers can "reach the same velocity" as over-the-top providers in offering new services. Virtualisation Alcatel-Lucent was "the first to move with a virtualisation platform", says Combes. "We launched it two years ago when no one was talking about virtualisation." Now, he says, "IP, cloud, ultra-broadband access by fixed and mobile — all that is converging". Some have speculated about Alcatel-Lucent's presence in the wireless segment, saying that it is one of the smaller players. Combes expresses his determination that the company is there to stay. The company is winning customers in the new markets, he says, listing 4G contracts with AT&T, Sprint and Verizon in the US as well as the three Chinese operators — China Mobile, China Telecom and China Unicom — for more 4G deals. Other 4G customers include Orange, Telefónica "and smaller players in Europe", he adds. "We have decided to focus on 4G and the evolution of the radio network to 5G. Both 2G and 3G were voice driven, and 4G is internet driven. But the cell architecture is going to disappear." In the future architecture will be distributed, with much more use of small cells, and more integration with fibre to the end user. "We have a clear vision to focus on 4G and 5G," says Combes. "We have the potential to be part of the new rollout of 4G", particularly in building new networks or overlay networks. When it comes to "refreshing or extending 2G and 3G networks we'll be less active", he suggests, "because that is less of a play for us". Alcatel-Lucent "has a clear view of where the network is evolving towards", he says. "People are starting to talk about 5G", which will be more than just the next radio interface. "It will be the end-to-end solution," he says. "It will embrace cloud, NFV, SDN and other new features." All of that requires investment, he adds. "We need to invest in the network infrastructure in order to deliver this new vision. The US has understood this earlier than the others." He's referring to the recognition by the US administration — not just the regulator, the Federal Communications Commission, but President Barack Obama too — that investment in mobile technologies is vital. "In the US Obama has asked the FCC to allocate 500 megahertz [in new spectrum]. That's an industrial vision." It's a virtuous circle, he says. Get the networks to invest in infrastructure, and that creates applications "and that creates an appetite by customers to pay for these services". In Europe, he sighs, the European Commission vice president Neelie Kroes is focusing on "fighting on roaming data tariffs". This is the wrong battle, he suggests. Reigniting Europe "Unlocking investment in Europe is an absolute necessity." Regulation in Europe should be focused on that aim, he adds. "We need to allow service providers to have decent margins and to allow us to invest again." Europe still has "low levels of investment" and "no digital economy", he says, leading to "the inability of service providers to monetise services", so that "margins are under pressure and they cannot invest". He adds: "We will have to break this circle if we are to reignite Europe." But, nevertheless, Alcatel-Lucent has "regained the right to play in the industry", says Combes. The first requirement was "to fix the balance sheets" and put the company in a position "to generate cash", he adds. "All this is targeted to allow Alcatel-Lucent to regain our innovative tractions." 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