Alcatel Drive To Cut Costs

However, it is in the process of selling FFr10 billion of non-core operations. Alcatel has made a bid for Thomson, the heavily indebted electronics group that is being privatised.

Serge Tchuruk, who took over as Alcatel's chairman last year, has promised that any deal will not worsen its debt/equity ratio.

On Friday, Standard & Poor's, the credit rating agency, put Alcatel's long and short-term debt ratings on negative credit watch. It said the impact of the possible acquisition of Thomson on Alcatel's credit quality was difficult to estimate at this stage. The agency described Thomson's current debt load as considerable.

 

S&P also put on negative credit watch the long-term debt rating of Banque Arjil, a merchant bank 72.9 per cent-owned by Lagardhre, the French conglomerate also bidding for Thomson. The agency said uncertainties remained over the structure of any eventual transaction in both operational and financial terms.

But it had taken note of Lagardhre's intention to keep only Thomson's defence activities, which would reinforce its positions in the sector, and its undertaking to maintain a conservative financial structure''.

It confirmed the bank's short-term rating.

Alcatel's disposal programme is expected to take another step shortly with the sale of its 21 per cent stake in Cofira, the financial holding company of Sociiti Frangaise du Radiotiliphone, France's number two mobile telephone operator, which is controlled by Compagnie Ginirale des Eaux.

Jean-Marie Messier, Gini rale des Eaux chairman, has indicated that Alcatel's exit from Cofira would be part of the reorganisation of his company's telecommunications activities. Alcatel is due to release half-year results on Thursday.

Figures already released have shown first-half sales fell from FFr78.3 billion to FFr74.3 billion, despite a rise in telecommunications sales from FFr29.1 billion to FFr30.5 billion.

Last year, Alcatel reported France's largest ever corporate loss of FFr25.6 billion, including FFr23.1 billion in exceptional provisions and charges arising from the restructuring launched by Tchuruk.