Shares rise in Alcatel-Lucent on Chinese whispers - Mobile World Live

Shares rise in Alcatel-Lucent on Chinese whispers

20 OCT 2009

Shares in mobile kit vendor Alcatel-Lucent jumped as much as 16 percent amid speculation that the firm could be bought by a Chinese rival, reports Reuters. Shares in the French/US vendor were up 16 percent on the Euronext exchange in Paris and up 11 percent on the NYSE, while Natixis – an analyst firm – lifted its rating on Alcatel-Lucent to ‘buy’ from ‘reduce.’ An Alcatel-Lucent spokesperson declined to comment on the developments. Chinese equipment vendors Huawei or ZTE are considered the most likely buyers. “Chinese firms including ZTE are very strong competitors, and have their own substantial R&D operations,” said Ren Wenjie, a telecoms analyst with First Capital in Shenzhen. “They probably wouldn’t be looking at buying the whole of Alcatel-Lucent, but rather at specific business units that would fit into their long-term strategy.”

According to Reuters, Alcatel-Lucent has a market value of about EUR6.3 billion (US$8.9 billion). It notes that the average deal premium for telecoms companies so far this year has been 29.5 percent, and that they are selling at around 7.8 times EBITDA. Based on those trends, Alcatel-Lucent could fetch between EUR8 billion and EUR9 billion, Reuters said. Speculation around a possible deal with a Chinese firm came on the same day that Alcatel-Lucent signed a contract with China Telecom to provide and maintain an IP/MPLS backbone across 10 Chinese provinces. The contract is part of a US$700 million agreement recently signed by the two companies.


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