Alcatel (Paris: CGEP.PA and NYSE: ALA) and Lucent Technologies (NYSE: LU) today announced the completion of their merger transaction and that they will begin operations as the world’s leading communication solutions provider on December 1st, 2006. The new company Alcatel-Lucent, with one of the largest global R&D capabilities in communications and the broadest wireless, wireline and services portfolio, is incorporated in France, with executive offices located in Paris. The company will be traded on Euronext Paris and the New York Stock Exchange (NYSE) from December 1st, 2006 under a new common ticker (Euronext Paris and NYSE: ALU). As a result of the merger, each outstanding share of Lucent common stock has been converted into the right to receive 0.1952 of an Alcatel ADS. In connection with the merger, Alcatel has issued approximately 878 million shares, which is equivalent to the total number of ADS to be issued to the holders of Lucent common stock. Following the completion of the merger, approximately 2.31 billion ordinary shares of Alcatel-Lucent are outstanding.

Serge Tchuruk, appointed today as Chairman of the Board of Alcatel-Lucent, said: “Alcatel-Lucent will be for our customers a partner with the scale and scope to design, build and manage increasingly complex networks that deliver advanced converged services and communications experience to the end-user. That is what Alcatel-Lucent will deliver with an unparalleled focus on execution, innovation and service for our customers: the company will have the most experienced global services team in the telecommunications industry, as well as one of the largest research, technology and innovation organizations in the industry. In fact, our combined company is ideally positioned to help our customers transform their networks so they can offer new kinds of personalized, blended applications and services.”

Patricia Russo, appointed today as Chief Executive Officer of Alcatel-Lucent, added: “Through this merger, we are bringing together two top-ranking companies to form an undisputed leader in the industry, a company poised to enrich people’s lives by transforming the way the world communicates. Alcatel-Lucent is a strong and enduring ally that service providers, governments and enterprises can count on to help them unlock new market and revenue opportunities. This combination represents a strategic fit of vision, geography, solutions and people, leveraging the best of both companies to deliver meaningful communications solutions that are personalized, simple to adopt and available globally. Both Alcatel and Lucent embraced a common culture of innovation and excellence that will help ensure the success of our merger.”

A global communications solutions provider

With a comprehensive and diversified portfolio of complementary products, Alcatel-Lucent is well-positioned to address the fastest growing areas of network transformation. The company is a leader in IPTV, broadband access, carrier IP, IMS and next-generation networks, and 3G spread spectrum (UMTS and CDMA). With more than 18,000 employees working in services worldwide, the company has the largest and most experienced global services team in the industry. In enterprise communications solutions, Alcatel-Lucent is No. 1 in Europe and has more than 250,000 enterprise and government customers worldwide.

A global reach with local presence

With a worldwide presence in 130 countries, 79,000 employees (after completion of the Thales transaction) and balanced revenues across all regions, Alcatel-Lucent has strong customer relationships with the 100 largest telecommunications operators in the world. The company will have four geographic regions: Asia-Pacific, Europe and North, Europe and South and North America, to answer the needs of service providers, enterprises and end-users in the most advanced telecommunication markets, as well as in high-growth economies.

There will be five Business Groups: the Wireline Business Group, the Wireless Business Group and the Convergence Business Group (addressing the needs of the carrier market), the Enterprise Business Group and the Service Business Group. Each Business Group will have a decentralized regional organization that will provide strong local support to customers.

In addition there will be several corporate functions that support the company including worldwide integrated supply chain and procurement, finance, information technology, marketing, human resources, legal and communications.

“While our respective corporate structures have changed, one constant remains: our commitment to be a first class corporate citizen and to act in a socially responsible way in interactions with all our stakeholders,” said Patricia Russo.

Unrivaled breadth and depth of research and innovation expertise

Approximately 23,000 of the 79,000 total number of employees at Alcatel-Lucent are in R&D, including global Bell Labs which will remain headquartered in New Jersey, USA. With Euro 2.7 billion invested in R&D in calendar year 2005 by Alcatel and Lucent and 25,000 active patents, Alcatel-Lucent stands as an innovation powerhouse, featuring one of the largest global R&D capabilities in communications ready to partner and collaborate with customers on breakthrough technology. Alcatel-Lucent also leads standards initiatives with some 600 experts participating in 130 standardization bodies.

Creating Shareholder Value

Significant cost synergies are expected to be achieved within three years of closing and will come from several areas, including consolidating support functions, optimizing the supply chain and procurement structure, leveraging R&D and services across a larger base, and reducing the combined worldwide workforce by approximately 9,000 employees. The merger is expected to result in approximately Euro 1.4 billion in pre-tax annual cost synergies. A substantial majority of the restructuring activity is expected to be completed within 24 months after closing. The transaction is expected to be accretive to earnings per share in the first year post closing with synergies, excluding restructuring charges and amortization of intangible assets.

Corporate governance

The 14 Members of the Board of Directors are: Daniel Bernard, W. Frank Blount, Jozef Cornu, Linnet Deily, Robert Denham, Edward Hagenlocker, Jean-Pierre Halbron, Karl Krapek, Daniel Lebègue, Patricia Russo, Henry Schacht and Serge Tchuruk, and two additional jointly agreed directors appointed by the Alcatel-Lucent Board: Sylvia Jay and Jean-Cyril Spinetta, who were not members of either Alcatel Board of Directors or Lucent Board of Directors prior to the merger. There will be two Board observers representing the employee shareholders of the company’s Employee Investment Fund: Jean-Pierre Desbois and Thierry de Loppinot.

ZAO Sky Link, the largest CDMA450 operator in Russia and Commonwealth of Independent States (CIS), and Lucent Technologies (NYSE: LU) today announced they are increasing the voice capacity of the Sky Link network in Krasnodar and enhancing it with CDMA2000 1xEV-DO technology. OAO Krasnodar Cellular Network, the regional Sky Link operator, and Lucent are upgrading existing Lucent base stations with CDMA2000 1xEV-DO technology and installing new equipment that will enable the operator’s Sky Turbo service, which provides data speeds of up to 2.4 Megabits per second. The project is beginning in the cities of Krasnodar, Sochi, and Novorossisk.

“Sky Turbo brings new, profitable multimedia services to the region and will help grow Sky Link’s reputation as a full-service 3G operator,” said Alexandr Piotrovsky, deputy general director of strategic marketing and sales for Sky Link. “The high data speeds enabled by CDMA2000 1xEV-DO – the main advantage of CDMA450 compared to the 2G standards – enables the proliferation of 3G services in the regional markets.”

“Subscribers in the Krasnodar territory and Adygea are the leaders in terms of mobile data consumption on Sky Link’s network,” said Michael Mochulsky, general director of Sky Link-Krasnodar. “In July, the share of non-voice services in our revenues grew up to 48 percent. The powerful Sky Turbo service delivers an enhanced mobile data experience to our subscribers and our main task is to make the access to the new services as convenient as possible.”

Within the project’s framework, existing Lucent base stations are being upgraded with CDMA2000 1xEV-DO channel cards and software. The Lucent Radio Network Controller (RNC) is being deployed to ensure a flexible and scalable management of the network’s RF (radio frequency) resources. Lucent Worldwide Services is providing installation and integration services.

“Every time we introduce EV-DO technology in the Russian markets, we see how it helps operators gain significant momentum via the introduction of new high-speed mobile data services,” said Dmitry Kamensky, managing director, Lucent Technologies Russia and CIS. “Operators that have deployed the technology are able to offer their subscribers various new, revenue-generating services.”

The EV-DO based Sky Turbo service delivers high-speed mobile data services and Internet access to Sky Link’s subscribers. It features the highest mobile data speeds available in Russia. The Sky Turbo service was commercially launched in December 2005 in the Sky Link-Moscow and Sky Link-St. Petersburg networks simultaneously. In March 2006, the Sky Link-Ekaterinburg network’s subscribers were granted access to the service.

Trial tests demonstrated that Sky Turbo enables subscribers to download files at average data speeds of 600-700 kilobits per second given standard network load conditions. The advanced wireless broadband Internet access and data transmission technology provides Sky Link’s subscribers with fast downloading of Internet content and large files, e-mail, IPTV, and remote video surveillance services.

The Sky Link network is based on the IMT-MC-450 standard (CDMA2000 1X and 1xEV-DO technology deployed in the 450 MHz frequency range), which provides advanced digital mobile communication services to subscribers — reliable, high-quality voice communication with the highest degree of unauthorized access protection, and high-speed data services including Internet access.

A handful of equipment vendors and US CDMA operator Verizon Wireless have banded together to take IP Multi-media Subsystem (IMS) technology to the next level.

Verizon, together with Cisco, Lucent Technologies, Motorola, Nortel and Qualcomm, is working to develop enhancements to the emerging IMS architecture.

The next generation architecture has been termed A-IMS (Advances to IMS) and aims to provide solutions to implement next generation services in current networks, as well as creating a foundation for the efficient roll out of both SIP and non SIP-based services in future networks.

The current outputs of the task force are a concept document and an architecture document that are being provided to industry players. The task force companies plan to make necessary standards contributions in the immediate future.

Paul Mankiewich, chief technology officer, Lucent Technologies Network Systems Group said: “We recognise the benefits of this collaboration, particularly in terms of multi-vendor interoperability, as we move into an all-IP mobility world. This effort continues to enable the delivery of blended voice, video, data and multi-media applications, what we call Blended Lifestyle services, to mobile end users.”