The U.S. Congress is set next week to review Alcatel’s $11 billion merger with Lucent Technologies (News - Alert) as the deal nears its final regulatory hurdle by the Bush Administration.

 

The House Armed Services Committee with convene a full session to receive testimony on national security implications of the Lucent/Alcatel (News - Alert) merger on Tuesday, November 14, according to the congressional panel’s Web site. The review comes on the eve of regulatory review by the Committee on Foreign Investment in the United States ("CFIUS"), an inter-agency committee overseen by the Treasury Department.

 

Company officials had no immediate comment. Assuming the hearings go off without a hitch, Tuesday’s mid-term elections, which shifted the balance of power from Republican to Democratic control, aren’t likely to impact the outcome of the regulatory review.

 

Because of Lucent’s ties with the Defense Department, national security has always been one of the thorniest issues for the French telecom equipment maker. But, as TMCnet Editor in Chief Rich Tehrani pointed out, that obstacle was clearly outweighed the market forces (commoditization, few buyers, etc.) driving Alcatel to consolidate in the first place.

 

While Ericsson’s acquisition of Marconi dates back to last October, many analysts still consider the Alcatel-Lucent deal to be the watershed event that set the wheels of industry consolidation in motion. Since the merger was announced last April, Nokia has formed a joint venture with Siemens to combine their telecom equipment divisions. A month later in July, Motorola announced it was partnering up with Huawei on their respective 3G businesses. In addition, Alcatel also reached an agreement to acquire the UMTS radio access assets of Nortel for $320 million in an effort to further build out the wireless side of its telecom equipment business.

 

Lucent’s importance to Alcatel was definitely evident when both companies reported their most recent quarterly profits. Thanks to customers like Sprint and Verizon (News - Alert), Lucent’s wireless portfolio helped the company deliver respectable results in what’s likely to be its swan song as a publicly traded company. That’s a remarkable contrast to the fiscal third quarter when the company disclosed a revenue shortfall after marquee customers like Cingular (News - Alert) Wireless began to curtail its enormous capital expenditures.

 

But the road certainly hasn’t been smooth for Alcatel. Shareholders of both companies did approve the deal back on September 7. But that was only after Lucent reached undisclosed settlement terms with two disgruntled shareholders that could have tripped up the merger.

 

Regulators at the FTC and the EU have already cleared the deal.

 

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Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.