February 22, 2013 11:05 am

Alcatel picks ex-Vodafone man as chief

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Alcatel-Lucent has hired Michel Combes, former head of Vodafone’s European business, as its new chief executive in the latest attempt to transform the fortunes of the ailing telecoms equipment maker.

Mr Combes, a French national who has also worked at France Telecom, will join in April, replacing the outgoing chief Ben Verwaayen, who failed in his own four-and-a-half year attempt to restore the company to financial health.

The new chief executive conceded that Alcatel faced “major challenges” as it attempts to stop haemorrhaging cash while coping with intense price competition from cheaper Asian rivals. The company’s net loss was €1.4bn last year.

But Mr Combes said it was an “unrivalled technology leader in the telecommunications industry with an immense array of talent and capabilities”.

The company has struggled since it was created from the poorly executed merger of France’s Alcatel and Lucent of the US in 2006. The appointment of a French chief executive, who knows the country’s political establishment well, is noteworthy given recent indications from the Paris government that it is prepared to intervene or invest in the company should it be required.

France has particular concerns about a €2bn Alcatel loan financing deal with Goldman Sachs and Credit Suisse, which is secured against its portfolio of 29,000 patents – considered the jewel in the company’s crown.

Mr Verwaayen said when his departure was announced that he believed that he had put the right strategy in place for the company but that “execution is not my strong point”.

However people close to the company said Mr Verwaayen’s strategy – based on cutting costs, products and markets where the company operates – would be subject to change with the incoming chief executive.

Philippe Camus, Alcatel’s chairman, said: “As chief executive Michel Combes will be responsible for delivering sustainable profitability. His deep knowledge of the industry as well as his experience of major business and financial transformation at a worldwide level will be pivotal.”

While at Vodafone, Mr Combes implemented a cost-cutting plan after a big drop in consumer spending in its southern European markets.

Alcatel has already implemented a restructuring programme to cut 5,500 jobs and €1.25bn from costs, but analysts have predicted that this would need to be the beginning of a deeper overhaul.

Nokia Siemens Networks, Alcatel’s European rival, cut 17,000 jobs to orchestrate a recent return to profit. However, heavier staff cuts will be politically difficult for Alcatel given the watchful eye of the French government.

Mr Combes had been lined up to take the helm of SFR, France’s second-biggest telecoms operator, last summer. But he pulled out at the last minute after Vivendi, SFR’s parent company, parted company with its chief executive.

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