Communications giant will concentrate on the enterprise market in China Alcatel-Lucent, the world's largest supplier of communications equipment and services, will increase investments in China as it sharpens focus on the enterprise market and the launch of new networks across the mainland by telecommunications operators. The company, formed last week by the US$11.6 billion merger between industry rivals Alcatel of France and Lucent Technologies of the United States, is expected to build up research and development, manufacturing and marketing activities in China, according to senior executives. Financial terms were not disclosed. 'We had been investing as two separate companies and considerable investments will continue to be made by the combined company because of the opportunities in China,' said Patricia Russo, the chief executive of Paris-based Alcatel-Lucent. 'We will spend more to position the new company as the undisputed leader in the industry.' Ms Russo said the company has made China - which has been its fastest-growing market - a strategic base for global research and development, and production of equipment for export and domestic consumption. Investments in China estimated by the former Lucent, based in New Jersey, totalled US$2.9 billion from 1985 to last year, while the former Alcatel acknowledged more than US$1 billion invested in the mainland as of last year. 'We will continue to do a lot of research and development in China, where 40 per cent of the 10,000 mainland staff are engineers,' said Ms Russo, who was Lucent's chairman and chief executive before the merger. Alcatel-Lucent, which is listed in Paris and New York, employs about 79,000 staff in 130 countries, including 23,000 engineers. Its annual research and development spending is about Euro2.7 billion (HK$28 billion). Ms Russo said growing demand for advanced communications technologies - including third-generation mobile networks, broadband access, internet protocol television and so-called 'converged' equipment that fuse mobile and fixed-line communications capabilities - have come from both the service provider and enterprise markets. On a worldwide basis, the exposure of Alcatel-Lucent to the carrier market is expected to exceed 80 per cent of annual sales and the enterprise market will account for less than 20 per cent, according to a report from European equity research firm Kintisheff Research. Annual revenues for Alcatel-Lucent, based on separate results of the two companies last year, total Euro18.6 billion. The company has about 250,000 enterprise and government customers worldwide and is the technology partner for 100 of the world's largest telecommunications service providers. 'The combined company will be positioned as the No1 network equipment vendor in the wireless infrastructure market, ahead of competitors such as Nokia, Ericsson and Motorola, as well as Chinese suppliers Huawei and ZTE,' analyst Tsvetan Kintisheff said. He noted that the global wireless infrastructure equipment market will account for about 38 per cent of annual sales for Alcatel-Lucent. Ms Russo touted Alcatel-Lucent as 'the only international telecommunications company with a leading position in the technologies for all 3G standards - CDMA2000, wideband CDMA and TD-SCDMA'. She said the company is working with China Mobile and China Unicom as they prepare for deployment in the mainland of 3G services 'whatever decision the government makes in terms of 3G standards'. The central government is expected to announce in the first half of next year the award of at least three 3G licences, one of which will be to supply services using the domestic and untried TD-SCDMA standard. With no 3G investments to make, the capital expenditure of Chinese telecommunications carriers will hit US$205.3 billion this year, according to market research group Analysys International. Last month, the former Alcatel renewed an agreement with Beijing-based Datang Telecom Technology and Industry Group to invest in the commercial development of TD-SCDMA. The former Lucent also had an extensive development deal with Datang. Ms Russo said the near-term challenges for Alcatel-Lucent include the two companies' integration, which will entail the lay-off of about 9,000 employees worldwide and the planned phase-out of certain products. The merger is expected to result in about US$1.7 billion in savings over three years.