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Lucent, Alcatel Merger Delayed; French Firm Seeks to Sell Satellite Arm

Posted on: Monday, 3 April 2006, 15:00 CDT

By MARTHA McKAY, STAFF WRITER

A hookup between Lucent and Alcatel appears to be on hold while the Paris-based company tries to wrap up a complicated deal to shed its satellite division, according to European reports.

Lucent and Alcatel confirmed last week they are in merger discussions, but representatives for both companies declined to comment Friday.

Alcatel's board met Thursday to discuss a potential deal with Murray Hill-based Lucent that would create a $35 billion telecommunications equipment company. Reports surfaced shortly after the meeting, quoting people familiar with the negotiations that the deal was 95 percent complete but that the future of Alcatel's satellite division was a sticking point.

Alcatel has been trying for a year to sell its satellite unit to French defense company Thales SA in exchange for a bigger stake in the company.

Alcatel's satellite division does classified work for the French government. Lucent's Bell Labs has U.S. government contracts to develop secret technologies.

Though the companies appear eager to join their phone-equipment businesses, there is a reluctance to bring divisions related to national security under the same roof, in part because this could make it harder to win government approvals for a deal.

Some analysts believe Bell Labs may be separated from a merged company and have its own board of directors.

The Alcatel satellite issue has mushroomed into a pan-European discussion with heads of state in France and Germany weighing in, according to a Reuters report.

Several other companies, including EAD, the parent of Airbus, want a piece of Thales, creating a satellite company partly owned by corporations based in several European nations.

If the satellite deal chess pieces fall into place, the Alcatel- Lucent merger is considered likely to move ahead. Analysts remain bullish on the proposal, which could touch off a series of mergers in the telecommunications equipment market.

Meanwhile, Lucent is also preparing to move 1,000 Bell Labs workers from its Holmdel center to its offices in Murray Hill and Whippany.

The company said this week it has sold its Holmdel offices to a Pennsylvania developer. The 472-acre property is under contract to Preferred Real Estate Investments Inc.

***

E-mail: mckay@northjersey.com

Source: Record, The; Bergen County, N.J.

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