Business life

The French group, already one of the world’s major telecom players, has recently multiplied targeted corporate acquisitions in North America in order to respond even more effectively to the challenge of the tremendous world-wide growth in the Internet.

With a turnover in 1999 of over 23 billion Euros*, the French group Alcatel is one of the world’s top telecommunications equipment manufacturers after the American Lucent and the Canadian Nortel. Now a distant heir to CGE (Compagnie Générale d’Electricité), founded in 1898, and which, throughout its long industrial venture, developed activities as diverse as electrical engineering, railway construction, nuclear technology and, of course, telecommunications, Alcatel has been refocusing on the telecom sector for over five years now. In 1995, this represented only approximately 45% of its turnover. 1998 was a crucial year with a heavily modified area of activities, due in particular to its reduced stake (from 50 to 24%) in Alstom’s capital (railways) and its withdrawal from Framatome (nuclear technology).

From electricity to telecommunications

"The refocusing of our activities has been a success", comments Jacques Dunogué, the group’s Secretary General. "In 1995, less than half our world turnover was in telecommunications. Four years later, telecommunications have increased their contribution to 85% in a turnover of a comparable amount."

This strategic choice has therefore proved to be right inasmuch as telecommunications across the world have experienced a particularly strong average annual growth rate in recent years of 15%. And the trend is not flagging, particularly with the spectacular explosion of mobile telephones and the Internet, where Alcatel likes to think of itself today as one of the major "architects" on the world stage.

In the 1980s, CGE had realized they needed to acquire an international dimension and get a foothold in the American telecom market, which seemed to be opening up with the ATT monopoly ending on January 1st, 1984. Three years later, it took over ITT’s activities in Europe at the end of long and bitter negotiations. GEC thus got over a decisive hurdle and became one of the biggest telecommunications players on the planet.

Alcatel has not forgotten this episode in the American venture. In October 1998, the group acquired DSC, a manufacturer in the United States of equipment for public telecommunications networks, at a price of 4.4 billion Euros* (28.9 billion Francs). In March 1999, it took over Assured Access, specialists in Internet network technologies, for 350 million Euros (2.3 billion Francs), and Xylan, also an American company producing voice and data business equipment, for 2 billion Euros (14.4 billion Francs). In the autumn of the same year, it was the turn of the Californian company Genesys Telecommunications Laboratories, software publishers for call centres - a heavily expanding market - to join Alcatel. The operation cost 1.5 billion Euros (9.8 billion Francs). Packet Engines, manufacturer of high throughput routers, has also been taken over for 315 million Euros (2.1 billion Francs).

The harvest does not stop there. In February 2000, Alcatel pulled out all the stops by announcing an agreement to acquire the Canadian Newbridge, which makes various items of equipment for the mobile telephone network for Internet access providers or cable television, at a sum of over 7 billion Euros (45.9 billion Francs). As the number one in the world in ATM (Asynchronous Transfer Mode), the Canadian firm also brings to Alcatel its ADSL (Asymmetric Digital Subscriber Line) technologies, fast Internet access via the telephone.

Conquering the world-wide Web

"This agreement is an important step in Alcatel’s strategy of positioning itself as a world leader in new generation networks capable of carrying an exploding volume of data, while providing an impeccable quality of service. With this operation we are adding to Alcatel’s top position in fast Internet access the considerable experience of Newbridge in ATM", explains Serge Tchuruk, Chairman and managing Director.

These various operations totalling investments of some 16 billion Euros (105 billion Francs) can also be explained by the influence of the United States with 40% of the world market (valued at 200 billion Euros, that is, 1312 billion Francs) in telecom equipment and half that of the voice and business data networks (40 billion Euros, that is, 262 billion Francs). "Not forgetting the United States’ qualities of dynamism and innovation," states Jacques Dunogué.

Established in 130 countries, Alcatel intends to develop in three areas: the United States, which have become its top market, since 1998, with almost 20% of turnover, Europe (over 60% of turnover) and the Pacific Basin (7.9%). "Since the beginning of this year, we have been reorganizing our operation in this area, whose headquarters of activities are now in Shanghai. A world first", Jacques Dunogué points out.

Alcatel is present with twenty or so joint ventures in China - top world market for mobile telephones -, where the authorities have announced their desire to open the country up to e-commerce.

* Roughly the same amount in Dollars; 151 billion Francs, based on 1 Euro = 6.55957 Francs.

Website: www.alcatel.fr

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