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Alcatel/Lucent Deal Could Trigger Corporate Buying Spree

6:20 am on March 27, 2006 | Category: Business, Corporate, Telecom Services

With telecom equipment giants, Alcatel and Lucent Technologies currently in merger talks, many analysts are saying that a deal between the two companies could trigger an industry-wide rush to merge and consolidate.

Consolidation among service providers has been happening for a number of years now, and has become a major topic of conversation among industry analysts, since AT&T and BellSouth announced a merger deal earlier this month.

As deals like this go through, there will be less potential customers for the worldâ€™s telecom equipment giants, which include not only Alcatel and Lucent, but also the likes of Cisco, Motorola, Nokia, Nortel, and Ericsson.

This will provide greater incentive for these huge corporations to not only snap up smaller competitors, but also consider mergers with each other. Some analysts have made bold suggestions of Cisco buying Motorola, in order to gain a presence in the cell phone industry.

â€œThis (the Alcatel/Lucent merger) could create a domino affect and I hope it does,â€ says Pip Coburn, chief strategist of telecom research firm, Coburn Ventures.

If this domino effect does happen, it will almost certainly happen quickly, with competitors likely eyeing the situation, and making acquisition plans. The NASDAQ telecommunications index has skyrocketed 15% this year, meaning that the longer companies wait, the more expensive mergers and acquisitions will become.

If the Alcatel/Lucent deal does indeed come through, we could quite likely see a number of other industry giants spring into action shortly afterwards, and buying up whatever competitors they can.

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