Senators cast wary eye on Lucent-Alcatel deal

By Jeremy Pelofsky and Susan Cornwell

WASHINGTON (Reuters) – U.S. senators on Tuesday expressed
some concerns about plans by France’s Alcatel to acquire Lucent
Technologies Inc. , ranging from threats to U.S. national
security to job losses in their states.

However, it was unclear whether the concerns ultimately
would force the telecommunications equipment companies to make
any changes to their $14.1 billion merger.

A backlash among lawmakers in the U.S. House of
Representatives and Senate forced a Dubai company last month to
drop its plans to acquire operations at six U.S. ports.

Sen. Charles Schumer, a New York Democrat, told Reuters he
planned to meet Lucent Chief Executive Patricia Russo later on
Tuesday to discuss the proposed deal and declined to say if he
had any concerns.

“She’s coming in to see me this afternoon,” Schumer said.

Lucent has agreed to create a separate U.S. subsidiary that
would be run by Americans and would handle sensitive government
contracts, in an effort to put to rest any worries about the
deal affecting national security.

The Committee on Foreign Investments in the United States
(CFIUS), an interagency body that examines foreign acquisitions
of American companies, must review and clear the Alcatel-Lucent
deal.

Another Democrat, Sen. Frank Lautenberg, also wants more
information about the merger.

“I have concerns about it, but I am doing some research on
my own,” said Lautenberg, who represents New Jersey where
Lucent is headquartered. The new, combined company would be
headquartered in Paris.

“I want to see whether there is classified material,
sensitive material from a defense standpoint that is going to
be transferred,” he told Reuters. Lautenberg said he has not
yet been able to fully discuss the deal with Russo.

“I am not at this point saying that it shouldn’t go through
but I want to learn a lot more about the details,” he said.

Another area that may be of concern is Alcatel’s
long-standing business relationships with Iran and Libya.

The company upgraded Tehran’s telecoms networks in a
contract it won in 2001, built Iran’s first-high speed DSL
Internet network and now provides communications systems for
gas plants there.

When asked about Alcatel’s business in Iran and Libya,
Lautenberg said he needs more information. “I want to know what
the effects might be on American protections, security,” he
said.

The United States has taken steps to improve relations with
Libya after the country said in 2003 that it planned to abandon
chemical, biological and nuclear arms programs.

Iran and the United States have been arch-foes since Iran’s
1979 Islamic revolution. Relations have been strained in recent
weeks because Tehran has resumed enriching uranium, which the
United States and some of its allies believe will be used for
constructing an atomic bomb.

Senate Banking Committee Chairman Richard Shelby told
reporters that he expected CFIUS to review the deal closely,
particularly if Alcatel had done business with Iran.

“If that’s so, then the committee on foreign investments
should look at that very closely, and I trust that they will,
in view of what’s happened in the last several weeks,” said
Shelby, an Alabama Republican.

Republican Rep. Duncan Hunter of California, head of the
House Armed Services Committee and author of a bill that would
require any company managing critical U.S. defense
infrastructure to be majority U.S.-owned, is also reviewing the
deal, his spokesman said.

Sen. Mike DeWine, an Ohio Republican, said Lucent has a
number of employees in Ohio. “We’ve started looking at it,” he
said of the proposed merger. The new company plans to cut about
8,800 jobs, or about 10 percent of its combined workforce.

(Additional reporting Astrid Wendlandt in Paris)