French Alcatel and American Lucent Technologies Sunday jointly announced a US$13.40 billion merger through stock swap, which creates a formidable Franco-American telecoms equipment manufacturing powerhouse with $25 billion revenue, 88 thousand employees and hundreds of customers in 130 countries across the globe.

It is the result of intensified competition that Euro-American telecoms hardware makers are facing from cheaper Chinese rivals. The new company's revenue would be slightly higher, but far less profitable, than Cisco Systems, the US maker of Internet routers and related equipment. Analysts believe the merger could prompt competitors like Swedish Ericsson, Canadian Nortel and German Siemens to seek their own deals so they can keep up.

The new company, which is yet to be named, will be based in Paris where Alcatel is also headquar-

tered. Lucent's legendary Bell Labs research centre remains in Murray Hill, New Jersey. Serge Tchuruk, Alcatel's chairman and chief executive, will be the non-executive chairman while Patricia Russo, Lucent's chairman and chief executive, will head the new company.

Alcatel and Lucent initiated merger talks in 2001 but it failed as they could not agree on how to control the combined company's shares. This time although both the CEOs are calling it a “merger of equals,” Alcatel's shareholders will control 60 percent and Lucent's shareholders will have 40 percent of the new company.

That clearly explains who is the bride and who is the groom in this dazzling corporate wedding. This trans-Atlantic couple also shares a common past sustaining huge financial blow after the telecom and dot com bubble bust in 2000.

Alcatel's revenue nosedived by more than 60 percent, from $37.70 billion in 2000 to $14.7 billion in 2004. It managed to recover by 7.4 percent, to $15.80 billion last year.

Lucent also suffered freefall from the peak of $28.90 billion sales in 2000 to $8.50 billion in 2003. Last year Lucent's sales recovered slightly to $9.40 billion.

The newly combined company's board will have 14 directors, including six members each from Alcatel and Lucent, some of whom are already on their current boards. Tchuruk and Russo would be among those six. The boards of both companies will also jointly appoint two new European directors to add more international flavour in the hierarchy.

This mega merger was approved by the boards of each company during last weekend and it is expected to be closed in six to 12 months. It has to be approved by both companies' shareholders and also needs the European and American regulators' consent. The Committee on Foreign Investment in the United States, overseen by the Treasury Department, and the Justice Department's antitrust division will also scrutinise this deal.