Analysts see benefits for Telecom from mega-merger

Analysts expect the $22 billion tie-up between telecommunications giants Alcatel and Lucent will have positive spinoffs for New Zealand's Telecom.

French communications equipment maker Alcatel announced this week it would buy smaller US rival Lucent Technologies Inc for US$13.4 billion ($22.03 billion) to gain more market heft and broaden its product mix.

Telecom has a $1.4 billion multi-year deal with Alcatel to upgrade its fixed line network, while Lucent last year upgraded Telecom's cellphone towers and beefed up its backbone mobile network infrastructure.

Chris Loh, a senior telecommunications analyst at IDC, said the merger would smooth Telecom's convergence of its fixed and mobile networks.

"We are just starting to hear about this whole thrust by Telecom for fixed-mobile conversion -- pulling traffic back off the mobile network and back on to the fixed network," he told National Radio.

"The merger will streamline the move. "

Consumers would eventually use dual-mode handsets that could cross between fixed and mobile networks, reducing the overall cost of calling, Mr Loh said.

Lucent and Alcatel have predicted around 9000 jobs, or 10 per cent of their global workforce, would go as a result of the merger.

Mr Loh expected some job losses here.

The transaction comes five years after the companies first discussed a merger, but those talks broke down in 2001 after Lucent baulked at the idea of a takeover, rather than a so-called "merger of equals."

Alcatel now would own 60 per cent of the combined company, which would have total revenue of US$25 billion. It expected the deal to boost earnings per share in the first year, excluding restructuring charges.

- NZPA