Monday, August 31, 2009

Does Huawei eye for stake in Alcatel-Lucent?

China's Huawei Technologies said on Friday it had no plans to buy a stake in Alcatel-Lucent, two days after the French-American telecoms equipment maker's stock jumped on market talk a Chinese rival could acquire it.

"Our customer-centric innovation strategy is driving Huawei's growth and that remains our strategy," Ross Gan, global head of corporate communications at Huawei told Reuters. "Huawei has no plans to take a stake in Alcatel-Lucent," he said.

Alcatel-Lucent's shares rose 16 percent on Wednesday on the market chatter and a rating upgrade by Natixis. By 0820 GMT on Friday, the stock had gained 3.1 percent in a broader market .FCHI up 1.3 percent.

A public relations official at Huawei's domestic rival, ZTE Corp, also said she had no information on any upcoming deal. "I think it is just a rumour," she said.

Huawei and ZTE have been expanding their operations aggressively in overseas markets, but those efforts are being driven mostly by organic growth. Analysts said any acquisitions would face stern regulatory scrutiny.

That scrutiny derailed an attempt by Huawei and partner Bain Capital to buy U.S.-based 3Com in 2007.

"Huawei is keen to expand internationally, so I'm not surprised that this has come up, but I would be surprised if it went ahead," said Damien Bailey, a telecoms specialist at law firm Simmons & Simmons.

"There will undoubtedly be consolidation in the telecoms equipment manufacturing sector, and I think there will probably only be three or four left, with Huawei and ZTE being two of those," he said.

Besides the regulatory concerns, any deal for Alcatel-Lucent would mark a major acquisition as the 2006 merger between France's Alcatel and U.S.-based Lucent Technologies has a current market value of about $9 billion.

For a related analysis on rival Nokia Siemens Networks

Alcatel-Lucent has been struggling to turn a profit since its 2006 merger, which was supposed to help it cut costs and better compete with Chinese gear makers including Huawei and ZTE. ($ = 6.83 yuan)


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