PARIS -- Alcatel (Paris: CGEP.PA and NYSE: ALA) today announced that it has signed an agreement to acquire Native Networks, an innovative provider of carrier-class optical Ethernet transport solutions. This acquisition builds upon the successful cooperation announced in February 2003 between Alcatel and Native Networks to develop a unique Ethernet packet ring technology. Under the terms of the agreement, Alcatel will pay approximately US$ 55 million in cash for the total capital of Native Networks.

Service providers require agile, multi-service networks to cope with increased bandwidth demand and with the need for greater network flexibility as triple play and broadband data applications become more widely available. The Ethernet Packet Ring Technology developed with Native Networks allows operators to introduce enhanced Ethernet features through a simple add-on engine to existing Alcatel optical multi-service networks or equip as needed in new installations. As a result, it optimizes the network’s performance by aggregating multiple services such as triple play, DSL, 3G mobile and Ethernet Virtual Private Networks services, over an integrated optical data infrastructure.

“Through this acquisition we are strengthening our value proposition and increasing our ability to address multi-service market requirements with innovative solutions to carry metro Ethernet and triple play traffic,“ said Romano Valussi, president of Alcatel’s optical networking activities. “This acquisition further demonstrates our commitment to enable our customers to introduce new services into their current and future networks in a cost efficient way.”

“Native Networks’ team is particularly proud to join Alcatel, the world leader in optical networking” said Rami Hadar, CEO of Native Networks. ”The combination of our core competency, technology and products will enable us to even better and more quickly meet the market demand for innovative Metro Ethernet solutions. Native’s vision of value added Ethernet services over an end-to-end carrier-class network is quickly becoming a reality. Native’s products successfully address carrier’s needs and jointly with Alcatel’s optical products we will best positioned to address the growing enterprise and residential demand for faster and scalable Ethernet services ”

Alcatel

Native Networks Ltd.