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Senators cast wary eye on Lucent-Alcatel deal

Posted on: Tuesday, 4 April 2006, 15:23 CDT

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)

Source: REUTERS

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