INTERVIEW: Alcatel Services Unit Head Sees Strong Market In 2009
Friday November 7th, 2008 / 14h14
By Jethro Mullen Of DOW JONES NEWSWIRES PARIS -(Dow Jones)- The market for telecommunications equipment services is likely to remain strong in 2009, despite the impending economic slowdown, the head of Alcatel-Lucent's (ALU) services division told Dow Jones Newswires Friday. "The services market still seems to be overall strong in 2009, although there are some parts of it which are weaker and some parts of it potentially stronger," Andy Williams said in an interview after the company unveiled a significant outsourcing contract with the U.K.'s BT Group PLC (BT). During a difficult year so far for Alcatel-Lucent's core carrier division, the services unit has posted strong revenue and profit growth. Its activities range from helping customers to introduce new technologies, such as digital TV, to taking over day-to-day management of operators' networks. The outsourcing of networks is a trend that may well accelerate as the slowdown forces operators to take a close look at costs while seeking to introduce new services into their networks, Williams said. Alcatel-Lucent said Friday it was taking over the management of five legacy networks that spread across 27 countries for BT's troubled global services unit. Last week, BT shares plummeted after the company conceded that it failed to gain control of rising costs at the unit. The credit crunch and looming recession "could well increase the trend" of operators outsourcing their networks, but "the trend has been there for a while," Williams said, noting that it took at least nine months to negotiate the contract with BT. Other operations could face problems, though. "Some could suffer a little bit, and by that I mean the big services programs and projects associated with big new investments by our customers," Williams said. Services being provided to operators rolling out new networks in emerging markets could suffer as a result. "Those sorts of things come into the category of big capital programs where I think there is a little bit of a question mark over the access to financing," he said. But overall, "as we look into next year we're pretty confident of continuing the trend from this year," Williams said. That positive trend contrasts with fears of another year of stagnation or worse in the core telecommunications equipment market. Carl-Henric Svanberg, the chief executive of Alcatel-Lucent's Swedish rival Telefon AB L.M Ericsson (ERIC), said in October he expected a "flattish" wireless equipment market in 2009 and had "measures in place also for tougher conditions." Alcatel-Lucent's new deal with BT will see over 500 BT employees move to the equipment maker and is worth "hundreds of millions of pounds," a person familiar with the matter said . Williams declined to comment on the details of the deal but said Alcatel-Lucent will be able to wring profits from it after an initial year that typically involves investment and cost cutting for such contracts. "When you look over the life of the contract, the profitability from our point of view is good," he said. "From the bottom-line point of view it's consistent with where we're going." Alcatel-Lucent's services division has seen adjusted operating profit more than quadruple to EUR177 million for the nine months ended Sept. 30 while revenue has increased 9.9% to EUR2.27 billion. The experience of Alcatel-Lucent's new chief executive, Ben Verwaayen, in running a telecom operator is a boon for the services division, according to Williams. "He completely understands services and the way in which services help our customers," Williams said. Verwaayen was BT's chief executive for six years until April. "There's a big feeling of change" within Alcatel-Lucent following Verwaayen's appointment in early September, Williams said. Verwaayen plans to present the conclusions of a strategic review in early December. Company Web site: www.alcatel-lucent.com -By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=rAiNfEpL3yJaxPyClBtHeA%3D%3D. You can use this link on the day this article is published and the following day.
