Alcatel says downturn to continue

16 Dec 2002

In posting its sixth consecutive quarterly loss telecoms firm Alcatel, which employs 85 people in Ireland, has said that it believes conditions in the telecoms market will worsen next year. The news comes fresh on top of reports that rival telecoms player Cable & Wireless (C&W) may run out of cash next year.

“The preliminary evaluation of 2003 market prospects confirms the likelihood of a further deterioration,” the company said in a statement on its website. Alcatel also said it plans to issue as much as €819m in convertible bonds. The stock fell 83 cents, or 16pc, to €4.5 in Paris. The statement continued: “To safely absorb this deterioration, Alcatel expects, as announced, to record additional reserves in the fourth quarter, which should still leave a significant improvement versus the third quarter income from operations. Concerning the restructuring actions, the current plan, as already announced, was seen as well adapted to safely meet the objective of reaching breakeven in operating income in 2003.”

Alcatel’s proposed bonds issue reflects a similar plan by C&W to issue bonds early next year to cover its increasing expenses. Unfortunately for C&W, the news comes on top of an unwelcome disclosure of a €1.5bn tax liability that will negate any potential benefits of the bond issue and will take several years to clear.

In order to transcend these difficulties, Alcatel intends to slash its workforce by 50pc. By the end of 2003 Alcatel will have trimmed more than 70,000 jobs. The company has a sales and marketing office in Dublin and the bulk of its workforce in Ireland is employed at a network operations support centre in Cork.

Earlier this year Alcatel shed more than half of its Irish workforce and closed a logistics centre in Shannon and a software design centre in Cork.

By John Kennedy