Alcatel cans $23bn Lucent merger plans

NEWS Ailing giants Alcatel and Lucent have dropped their $23bn merger - a plan which would have seen them form the world's largest telecoms equipment maker. And Alcatel has announced that it is to post a $2.6bn loss for its second quarter. Lucent lost $4bn in its first half year. Neither company would comment on the reason for the failure of the merger, but reports say that Alcatel was treating the deal as a no premium takeover and that control of the merged company was in doubt. The failure of the deal still leaves Alcatel on the way up: it has spent most of the 1990s pulling itself together and expanding in the US. But some of its US investments are not performing to schedule and yesterday's company statement puts a gloss on what the management sees a slowdown in the US and 'parts of Europe'. Lucent, however, is still floundering. In the past 18 months it has moved from being a stock market darling to a dinosaur hampered by its failure to develop optical technology and crippled by a series of bad loans to telco operators. The AT&T spin-off has been looking for a merger partner for the last half year. In the frame have been ,Cisco Nokia, Nortel and Siemens. Only Alcatel showed any concrete interest. At best, the long-touted deal would have faced a series of massive regulatory hurdles. The combined company would have had over 50 per cent of the world's telecoms equipment market and over 35 per cent of the optical market. It is difficult to believe that regulators in Brussels or Washington would have let this by. It is even harder to imagine that anyone in the US would have been in favour of seeing Bell Labs, with its work on key US defence contracts, passing into foreign control. The market had never rated the prospects of the merger or its success. Shares in Lucent have fallen 15 per cent since the first rumours of the deal surfaced and those of Alcatel have fallen eight per cent.