Alcatel-Lucent Merger: Ten Things You Need To Know

1. French firm Alcatel (News - Alert) SA is in talks to "merge" with Lucent Technologies (News - Alert), Inc. to form a $34 billion company -- Alcatel $20 billion, Lucent $17.7 billion -- with annual sales of over $25 billion.

2. The deal would not offer a stock premium to either set of shareholders.

    2a. Right, give us that funky quote again -- Alcatel and Lucent are "engaged in discussions about a potential merger of equals that is intended to be priced at market,"

    2b. The company would be based in Paris and its CEO would be Lucent's Patricia Russo, according to current speculations.

3 There are three important factors in telecom right now -- consolidation, consolidation and consolidation.

     3a. Remember when there were seven Baby Bells? Operating on the old Ottoman Empire's royal principle of killing off all your siblings to consolidate power, there are three now.

    3b. Sprint's the only independent long-distance carrier left. Everyone else is getting bigger and bigger.

    3c. And this skins Lucent and Alcatel's cats because… "The bigger the (telecom) carriers become, the power shifts more to the customer," Ping Zhao, a senior telecom analyst at CreditSights told USA Today.

4. They've tried this before. About five years ago Alcatel tried to buy Lucent, which was all for the deal in principle, but couldn’t nail down the management control issues, so it fell apart. A Deutsche Bank investment advisory released today reminds everyone that "the devil is in the details, because there is no transaction as of yet. Just talks. Let’s wait to see how this 'merger of equals' actually gets structured."

    4a. Because, as a wise man once noted, some are more equal than others.

    4b. It isn't that Lucent's the prettiest girl on the market -- if the deal goes through the combined entity is still smaller than Ericsson (News - Alert), Nokia (News - Alert) and Siemens. And there's all that debt and $2.4 billion in unfunded pension and benefit obligations.

    4c. But she does have great CDMA, and she's got great family connections: George Calhoun, a professor of business and technology at the Stevens Institute of Technology told USA Today that Alcatel's been trying for 20 years to penetrate the U.S. market.

    4d. Her… sales are kinda flat, too. And it's not like her CDMA's a really attractive  long-term asset. Oh well, love is blind.

5. Seeing as how Lucent does between $4 and $5 billion in revenue from selling wireless gear, much more than Alcatel, it's not like she's an ugly old hag.

6. If we wouldn't let a Dubai company take over our ports, why would we let a French company take over Bell Labs?

    6a. Shoddop.

7. Ericsson, once linked romantically to Lucent, is forever holding its peace on whether it still carries a torch.

    7a. Yeah, wasn't there some gossip in the City of London along those lines?

    7b. Those tabloids, there are lots of names floating around. What, somebody has photographs? Ericsson just married Marconi for $2 billion in dowry, this ain't Big Love.

8. The one thing everybody seems to agree on is that there will be more consolidation, with Tellabs and Ciena, for example, looking to be picked up, and Nortel (News - Alert) looking to pick someone up, according to Steven Kamman.

9. Let's talk jobs -- or raison d'riot, as they're called in France. Alcatel has over 50,000 of them (insert "fifty thousand Frenchman" punch line here), and Lucent has 30,000, down from 46,000 in 2002. Guess which ones are going to get whacked. Hint: Renaults are a lot more flammable than Fords.

10. Business considerations, aside, it's probably easier to get Southern Baptist Sunday Schools approved in Iran than to get regulatory approval for this deal in Washington right now.

    10a. Industry analyst Jeff Kagan says " the issue of foreign ownership of a US telecom firm may raise concerns that will have to be addressed."

David Sims is contributing editor for TMCnet. For more articles please visit David Sims' columnist page.

[ Back To TMCnet.com's Homepage ]