Fears over Alcatel/Lucent merger

Alcatel and Lucent may be forced to rethink their possible $40bn merger in the face of regulatory concerns over the power of the joint company, according to analysts.

There is also a fear that the Alcatel takeover of Lucent, which combined would employ 250,000 people, could lead to massive job cuts of up to 50,000 staff.

The possible merger would make Alcatel the dominant player in the broadband equipment market. Senior analyst at Bloor Research, Graham Fisher, said that the combined Lucent and Alcatel would create a $77bn company with 57 per cent market share - a move that would definitely attract interest from the monopolies commission, he said.

Fisher also pointed out that the US National Security Agency (NSA) would have concerns over the deal as Lucent is a developer of security and encryption products for the Government. "There would be a national security issue here," he said, pointing out that the US Government would not want a French company so closely involved in national security.

Should the merger go ahead, Alcatel might be forced to sell off Bell Labs, the Lucent subsidiary involved in the NSA work.

There is also concern over the potential for job losses. US analysts have pointed out that the combined company would have 250,000 employees and could look to axe 20 per cent - 50,000 jobs - in order to make savings out of the merger.

"There are some serious hurdles to overcome," added Fisher, "but this possible merger is indicative of the consolidation that is going on in the market."

He added that even if the merger did not go ahead, it was likely that some other company would pick up Lucent sooner or later.

The Lucent board is meeting this week to consider whether to continue talks with Alcatel.