Lucatel Clears Euro Hurdle
Hmmm. Is that a good thing or a bad thing?
The EC's Competition Commission ruling, issued today, notes that the main impact of the merger -- creating the company we refer to as "Lucatel" until a new name is announced -- would be on the optical and DSLAM markets.
But the commission found that "despite the considerable market shares the merged entity would have in these product areas, the market structure would remain competitive even after the proposed transaction."
It added: "In particular, a number of effective competitors would remain in the market and customers [mostly network operators] would be able to sufficiently constrain the merged entity through their countervailing power in bidding procedures that are a characteristic of the industry."
Roughly translated, the EC reckons that there is so much cutthroat competition in the telecom equipment market that the combined Lucatel won't have much better pricing power. (See Report: Huawei Grows Up and Pressure Piles on Huawei, ZTE.)
The commission also noted that competition concerns were unlikely to arise "with respect to the other activities in which the parties are both active, including switching and routing equipment and narrowband (TDM) switches."
Alcatel and Lucent's plans to wed have proceeded quickly, with the two companies saying recently that they expect to close the merger before the end of 2006. With that timeframe in mind, the duo has been assigning key Lucatel roles to existing executives. (See Lucatel: New Team, Old Faces.)
Not everything is going smoothly, though, as the original COO has already stepped down from that role, and there are other concerns facing the two vendors' staffs. (See Quigley Steps Down as Lucatel COO, Inside Lucatel: Quigley's Not Mad at Pat, Lucatel Staff Face Wage Worries, and Lucatel: French Staff Not Safe.)
Lucent's share price is up 5 cents, more than 2 percent, today to $2.10, while Alcatel is up 31 cents, nearly 3 percent, to $11.01.
When the merger was first announced in April this year, Alcatel's share price stood at $15.40, while Lucent's was $3.05, so both have lost considerable capitalization since announcing their engagement.
— Ray Le Maistre, International News Editor, Light Reading