Alcatel, Lucent Face Security Grilling

Representatives from Alcatel (NYSE: ALA; Paris: CGEP:PA) and Lucent Technologies Inc. (NYSE: LU) have been called to a hearing organized by the House Armed Services Committee to answer questions about the national security implications of their proposed merger. (See Alcatel, Lucent Seal Deal.)

The hearing, organized by the Committee's chairman, Republican Congressman Duncan Hunter, and scheduled for 2 p.m. on Tuesday, November 14, in Washington, D.C., comes as the vendors make their final plans to become one giant telecom equipment supplier. (See Alcatel Preps New Tech Roadmap.)

The Committee's members are expected to hear testimony from representatives from the vendors and officials from the Committee on Foreign Investment in the United States (CFIUS), which has been reviewing the proposed merger. However, a list of "witnesses" due to speak at the hearing has yet to be announced. (See Alcatel/Lucent Wait on W OK.)

At the heart of any security concerns is the role of Lucent's Bell Labs , which does a lot of U.S. military-related work. Lucent has addressed this situation by planning for the Labs to become a separate subsidiary in a post-merger world, though questions have already been raised as to whether that will be enough to satisfy the concerns of some U.S. lawmakers. (See Analyst: Alcatel Should Rethink Things.) The vendors should prepare themselves for a challenging session next Tuesday. Congressman Hunter, who represents California's 52nd Congressional District, has already made his feelings clear about the proposed merger. Only weeks after the vendors announced their intentions to join forces, Hunter wrote a letter to President Bush saying that he had "several grave concerns about the potential merger of French-owned Alcatel and American-owned Lucent Technologies.”

He added: "These concerns arise in large part because Lucent Technologies and Bell Labs, a critical component of the parent company Lucent Technologies, conduct a significant amount of highly classified work for the United States government, including the Department of Defense. I am skeptical whether the current CFIUS process could provide adequate, verifiable assurances that such sensitive work will be protected.”

The vendors are keeping their thoughts about the hearing to themselves, at present. "We have heard from the Committee and have their request under review," says Lucent spokeswoman Mary Lou Ambrus, while Alcatel issued an identical statement.

Investors clearly aren't worried that the hearing might scupper or delay the deal. Alcatel's share price is down just €0.08, less than 1 percent, to €10.33 in Paris today, while Lucent's stock is up 1 penny to $2.53 in pre-market trading this morning.

— Ray Le Maistre, International News Editor, Light Reading

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whyiswhy 12/5/2012 | 3:34:47 AM
re: Alcatel, Lucent Face Security Grilling "That wouldn't be possible without major cooperation from the service provider, for sure. In effect, it would double the total interface size of the PSTN, for one thing..."


It's public information as long as 40 years ago the US was listening in on most of the USSRs military and diplomatic traffic from microwave to undersea cable to wires to coax...

Read a few books about how it was done very efficiently and automatically years ago (before anything like word recognition), and imagine the US government has spent a billion every year since getting better and better at it...

corwin0 12/5/2012 | 3:34:46 AM
re: Alcatel, Lucent Face Security Grilling Brookseven,

I have thought about it - the USG access to coms channels is most probably NOT in commodidty hardware (think about how many people have access to those platforms).

If it were in those platforms, the operators would most definately notice the data outflows (it would be their bandwidth being used, afterall, unless you assume that there is some tachyon/graviton emitter hidden in those circuit packs).

The access, if it exists, is somewhere else.
belakinabale 12/5/2012 | 3:34:42 AM
re: Alcatel, Lucent Face Security Grilling ... at the grilling? Did not see any new supply of french fries :) on lightreading.
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