French Telecom Company Alcatel Merging with Lucent

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RENEE MONTAGNE, host:

On Mondays, our business segment focuses on technology. We begin today with a report on a merger.

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MONTAGNE: Lucent Technologies, which manufactures telecommunications equipment, is merging with the French company, Alcatel. The companies announced yesterday that Alcatel will pay more than $13 billion dollars to acquire Lucent.

Lucent was one of the companies that emerged from the breakup of AT&T in the 1980's. Based in New Jersey, it owns the legendary Bell Labs, and Bell Labs was responsible for such technological breakthroughs as lasers, the transistor, and cellular telephones.

NPR's Jim Zarroli joins me now. Good morning.

JIM ZARROLI reporting:

Good morning.

MONTAGNE: So, what do we know about the new company that will be formed from this merger?

ZARROLI: Well, if you take it by the numbers, it's going to have annual revenues of about $25 billion dollars. It will employ about 88,000 people, although the company says about 10 percent of the workforce is going to be laid off once the deal goes through.

The company will be based in Paris, but it will have a significant presence in North America, Asia, and Europe. It also will have a different name, although the companies say they don't know yet what that will be.

Patricia Russo, who now is the head of Lucent, will be the Chief Executive. The head of Alcatel will be the Chairman, and the two companies will have an equal number of seats on the new board.

MONTAGNE: And Jim, this merger has been talked about for a long time. Why were, in the end, the two companies so eager to join together?

ZARROLI: You know, a lot of different things are happening. A lot of different forces are sweeping through the telecommunications business these days. We're seeing, for instance, lots of new kinds of equipment, like personal wireless devices that, you know, connect to the Internet and show video. So there's a lot of opportunity right now if you're a company that makes equipment.

At the same time, with all the mergers taking place, like the big deal between AT&T and Bell South last month, there are fewer customers for equipment makers to sell to. There's a lot of low-cost competition from Asian companies, so both Alcatel and Lucent feel like they need to be stronger to compete. One way to do that is to join up, join forces.

They say together they will have strong research and development facilities--very strong presence in wireless and wire line technology.

Of course, you have to say these are very different companies. There are almost always cultural issues to work out when you have a combination like this, and in this case, you have companies from two different countries, so it's likely to be even tougher.

MONTAGNE: And who has to approve this deal? And might there be potential obstacles?

ZARROLI: Yeah, there might. Like any big merger, of course, the United States government has to approve this, as will regulators in Europe. After the collapse of the Dubai Ports deal, the Ports World deal, there's obviously a lot of concern about foreign ownership of U.S. assets. That could come into play here.

Bell Labs does a lot of very sensitive work for the Pentagon, areas like laser technology. Now, to head off any potential trouble, the company said yesterday that Bell Labs would be placed in a separate, independent subsidiary that's going to be overseen by U.S. citizens. I think the general feeling among people who watch the industry is this deal will probably go through.

MONTAGNE: Thank you very much.

ZARROLI: You're welcome.

MONTAGNE: Talking to us about the announced merger of Lucent and the French company, Alcatel, NPR's Jim Zarroli in New York.

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