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April 22, 1992

THE NUMBERS THAT ADD UP TO MAKE ALCATEL A LEVIATHON IN WORLD TELECOMMUNICATIONS KIT

By CBR Staff Writer

Alcatel-Alsthom SA managing director Pierre Suard proved his mettle as a manager as the industrial mastodon, and its telecommunications subsidiaries, Alcatel NV and Alcatel Cable, all posted solid results for 1991, with Suard promising new growth this year. Even more impressive given the conglomerate’s zero growth in 1990, Alcatel-Alsthom reported an increase in sales of 11%, of which 7% was internal growth, to over $28,500m. The glowing 1991 report card, which included Suard’s coup in taking back 100% control of Alcatel NV and buying the transmission business of Rockwell International for $680m, is said to be attributable largely to his dogged strategy of simplifying the financial structure. It is also down to the improvement in operating margins of Alcatel-Alsthom’s big subsidiaries brought by a restructuring program that saw the elimination of loss-making businesses like space radio communications and accumulators. Taking full control of Alcatel NV cost Suard $3,350m – $4,800m counting the other parts of ITT Corp he has bought since 1987), but Alcatel Alsthom now owns the world’s number one manufacturer of telecommunications equipment, ahead even of AT&T Co. Few would have imagined Alcatel NV would have achieved this when the former Compagnie Generale d’Electricite SA bought 56.3% of ITT’s European telecommunications equipment business in 1986 – two competing digital telephone exchange lines in one company looked like an accident waiting to happen and the original Alcatel ones looked doomed. But today sales of the two companies’ switches are virtually equal – 44m lines for ITT’s System 12 – and it announced last October a model for large band-width communications that converges the two technologies. Alcatel Business Systems had a less positive year. STC Plc in the UK was bought by Northern Telecom Ltd, increasing competition, and the subsidiary has yet to find a paying strategy in the area of private telephony. A drop in profitability, unresolved problems in integrating the two lines of PABXs from ITT and Alcatel, and the general absence of a clear product strategy led to the replacement of the head of Alcatel Business Systems, Georges-Christian Chazot, with Hughes Garin, formerly of Thomson SA, in July 1991. In satellite technology, 1991 was the year of consolidation of ties with Aerospatiale and Italy’s Alenia in technical, manufacturing and sales agreements. The trio is expected to finalise soon the purchase of 59% of the satellite business of New York-based Loral Corp’s Space Systems for $171m. Of all of Alcatel-Alsthom’s subsidiaries in 1991, however, few can compare to Alcatel Cable. The world’s number one cable supplier acquired Canada Wire and AEG Cable in Germany, propelling its revenues over the $5,350m mark – as opposed to $4,380m in 1990). Then there were the contracts: $680m as the head of a consortium, to lay 11,250 miles of fibre optic cable between Singapore and Marseille; $290m to lay more submarine fibre optic cable in Australia, plus other key contracts for terrestrial cables in Thailand and Pakistan. Five years ago, 64% of Alcatel-Alsthom’s business was within French borders. Today that percentage is merely 36%, now, 75% of its revenue comes from the Old Continent. It’s no wonder. Last year, Alcatel-Alsthom bought Canada Wire and Rockwell’s transmission business in North America, doubled its size in Germany and muscled into Italy by doing a deal with Fiat SpA and integrating Telettra SpA into the organisation. Suard expects there to be a pause in that flurry of acquisitions for 1992. We will take a break from our policy of growth, he said.

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