Alcatel, Lucent discuss potential 12.6 billion buyout

Deal would lead to further consolidation in the telecom industry, after ATT struck a deal to buyout Bell South for 67 bn

Lucent Technologies, the phone equipment maker that became a symbol of last decade8217;s boom-and-bust cycle in telecommunications, is in negotiations to be acquired by Alcatel of France for about 12.6 billion, people close to the discussions said.

The two companies confirmed the talks in a statement, saying they were 8216;8216;engaged in discussions about a potential merger of equals8217;8217;.

After several years of mergers on a huge scale among telephone companies 8212; local, long-distance and wireless 8212; a deal for Lucent would be the first big step toward a shakeout among the companies that make the equipment for the phone service providers.

The prospect of a big trans-Atlantic deal comes at a time when foreign takeovers have been political flashpoints in both Washington and Paris. People involved in the talks said the negotiations had advanced in the last week, but cautioned that they could still fall apart. They said the disclosure of the talks could delay or derail any such deal.

The companies said last night that they would make 8216;8216;no further comment until an agreement is reached or the discussions are terminated8217;8217;.

The talks come nearly five years after the two companies called off what would have been a 22.8 billion merger.

For Lucent, based in Murray Hill, New Jersey, a sale would be the last chapter in an extraordinary story of struggle. In 2002, the company was on the brink of collapse, but survived by eliminating thousands of jobs and cutting billions in debt.

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Yet as Lucent has returned to profitability, the telecommunications landscape in the US has radically changed.

Lucent has lost many of its largest customers as the regional Bell phone companies gobbled up rivals, steeply reduced investment in their older copper-line networks and spent more on fiber optic equipment that has fallen in price.

Consolidation among the phone companies 8212; this month8217;s 67 billion deal between AT038;T and BellSouth being the most recent 8212; has raised expectations that at least some of the equipment makers that serve them will also merge.

Lucent and, to a lesser degree, Nortel Networks in Canada, have been considered the most likely takeover targets because of their depressed stock prices and lukewarm business prospects.

ANDREW ROSS SORKIN and KEN BELSON