updated 3/24/2006 7:34:39 AM ET 2006-03-24T12:34:39

France's Alcatel and Lucent of the U.S. on Thursday night said they were in talks about a merger that would unite two of the world's largest telecommunications equipment makers and test the environment for transatlantic corporate deals.

In a statement, Alcatel and Lucent, which already engaged in failed merger negotiations five years ago, claimed to be discussing a "merger of equals".

But people close to the discussions said the final structure of any transaction was more likely to involve a takeover of Lucent by Alcatel, which would value the US group at about $13bn. Alcatel's market value is close to $20 billion.

The proposed new union of Lucent and Alcatel comes after years of speculation that a wave of consolidation may be about to hit the telecoms equipment industry, which has been slowly recovering from its woes in the wake of the bursting of the internet and telecoms bubbles.

Pressure for the two companies to engage in fresh talks may have been heightened by the latest round of mergers among some of their largest clients, the big telephone companies. This month, AT&T made its latest acquisition when it agreed to acquire BellSouth, its U.S. peer, for $66 billion.

The ability of Lucent and Alcatel to successfully carry their proposed merger to term could represent a key test of the environment for cross-border and transatlantic dealmaking.

Issues over corporate culture and control already soured the last round of discussions between the two companies in 2001, and since then relations between the US and France have taken a turn for the worst.

In pursuing Lucent, Alcatel is coveting the company's recognition and business in the U.S., as well as its CDMA wireless technology, which serves customers such as Sprint Nextel and Verizon Wireless.

Copyright The Financial Times Ltd. All rights reserved.


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