Alcatel-Lucent may sell assets after posting loss

TELECOM EQUIPMENT maker Alcatel-Lucent may sell assets to strengthen its balance sheet after posting a second straight quarterly loss as its customers around the world cut spending on mobile and fixed networks.

Chief financial officer Paul Tufano said the group was considering options such as “reprofiling our debt or an infusion of liquidity, including asset sales”. Alcatel’s submarine cable business and a unit that sells telephone systems to big companies are both candidates for sale.

Goldman Sachs analysts estimated that sales of the submarine optic and the corporate telephony units could raise up to €400 million. One of the sources said the valuation would be “much higher”, without giving details, while Bernstein analyst Pierre Ferragu said the submarine business alone could attract bids of more than $1 billion “if sold at its best”.

Despite making cost cuts, Alcatel-Lucent burned through €1.03 billion in the first nine months of this year, compared with €978 million last year.

The company faces about €2.2 billion in debt repayments through to the end of 2015, with a major deadline on January 1st, 2015, according to analysts.

Chief executive Ben Verwaayen, who has been struggling to turn the company around since September 2008, said the group was on track with a cost-cutting plan to axe about 5,500 jobs.

Third-quarter revenue fell 2.8 per cent year-on-year to €3.60 billion in response to lower spending on network gear in the US and Asia, and a steep 15 per cent decline in Europe.

Alcatel-Lucent’s adjusted operating loss widened to €125 million in the third quarter, from a loss of €31 million in the second.

As with rivals Ericsson and Nokia-Siemens Networks, Alcatel-Lucent’s profit margins have been hit hard this year by customers’ spending cutbacks. Even Verizon, Sprint and ATT, which spent heavily last year to build super-fast fourth generation networks, are slowing spending this year.

The US carriers account for more than one-third of Alcatel’s sales and are a big profit driver because the absence of cheap Chinese rivals in the US market has kept prices higher. Alcatel-Lucent shares are at historical lows of about 77 cents. – (Reuters)