Ten ‘think before you judge’ factors to consider for this somewhat implausible merger of vendors. 

1 Size matters: A combined Alcatel-Lucent would trail the industry giants — Ericsson, Siemens, Cisco and the up-and-coming Chinese vendors like ZTE and Huawei – in terms of market cap. But “Lucatel” would rival them in terms of telecom equipment sales volumes.

2. The culture: France and the United States are not on the best of business terms. France views the Americans as a bunch of militaristic, linguistic and cultural imperialists and the US sees France as “cheese-eating surrender monkeys.”

3. French prejudice: statist or dirigiste policies are the norm in the ICT sector and Alcatel is the technology engine for that.

4. US prejudice: Lucent dabbles in technologies that paranoid Americans might link to “national security”, which are off limits to foreign suppliers.

[There is no shortage of paranoid Americans and there is no shortage of dirigiste French politicians, industry chiefs or workers].

5. Consolidation: the three points above should say that the benefits of this type of merger - cost cuts, staff cuts, etc – will be politically almost impossible to pull off. But there will be unremitting pressure from similar combinations across the ICT sector.

6. Once bitten, twice shy: five years ago, these two tried to merge in an effort that fell apart amidst what the divorce courts would call “irreconcilable differences” just as the technology markets went belly up. Few discernible differences are apparent in 2006.

7. Both Alcatel, in its European incarnation, and Lucent, in its equivalent US position, appear wedded to incumbent PTOs. How clever is that when the telecom world is moving in an altogether different direction?

8. R&D: both companies are also deeply involved in research to benefit PTOs, just as the market is dismantling PTO technologies in favour of alternatives such as VoIP and WiFi.

9. Share folly. Alcatel is proposing to buy out Lucent using its own shares as currency. Oh no, oh no, oh no.

10. Regulation: Brussels will approve the deal if Alcatel takes control, but Washington may block it for the same reason. And vice versa.

An eleventh point (one to ignore) is that ageing Alcatel ceo Serge Tchuruk might find the proposed deal as a way of getting Patricia Russo, current ceo and Chairman of Lucent, as a successor in a merged ‘Lucatel’. But wait.

“Respected as a thought leader in the industry, Ms. Russo was appointed by President George W. Bush as vice chair of the National Security Telecommunications Advisory Committee in April 2003. She also is a member of the Network Reliability Interoperability Council.”

The French will love that. Or not.
Jim Chalmers