Alcatel/Lucent merger tipped to start wave of consolidation

Stuart Corner
Sunday, 02 April 2006 07:36

IT Industry - Strategy

The Yankee Group predicts that a merger between Alcatel and Lucent will lead to a global spike in M&A activity for the vendor community within a year.

In the next two years, Yankee Group expects major structural changes in the industry, which, it says, will overlap with the transition and integration period for an Alcatel and Lucent merger.

"These structural changes are being driven by carrier consolidations and an equipment market that has become increasingly competitive with the entrance of new low-cost global competitors. In addition, disruption by rapid technology change has created greater vulnerability with vendors. This means that a wave of potential mergers with vendors such as Motorola, Ericsson and Nortel will emerge in the aftermath of Alcatel/Lucent merger talks."

Yankee Group says that, even if this merger fails, several smaller vendors are already reaping the benefits as potential acquisition targets.

"The potential Alcatel/Lucent merger is another confirmation of the telecommunications industry experiencing dramatic changes in business models, strategy and operations," said Nick Maynard, Yankee Group senior analyst. "As carrier consolidation continues to drive increased vendor instability, existing players will need to seek merger and partnership opportunities to compete within the new market structure."