Alcatel Sets Asia-Pacific Base In Shanghai

HONG KONG (01/28/2000) - In anticipation of explosive growth in the Mainland China telecommunications industry, Alcatel SA is setting up its Asia-Pacific headquarters in China.

However, the company will not set up its headquarters in Beijing, the longtime political and technological center of the country. Instead, Alcatel has picked the city of Shanghai, the company's traditional stronghold since it established a presence in China in 1983.

"By 2003, China will have overtaken Japan as Asia-Pacific's largest telecommunications market. The establishment of the regional office in Shanghai will enable more effective decision-making close to our customers," said Serge Tchuruk, chairman and CEO of Alcatel.

In the Mainland, Alcatel currently has more than 5,000 staff, 4,000 of whom work in Shanghai. The majority of these workers are employed at the company's joint venture, Shanghai Bell, one of the world's largest switching manufacturers with an annual output of 7.8 million lines, according to Tchuruk.

"The presence of the substantial resource and technology base makes Shanghai the logical choice for our regional headquarters," said Tchuruk, adding that the company expects Shanghai to become the region's commercial and financial center in the future.

Until now, Alcatel has not had a centralized Asia-Pacific headquarters. The company's regional staff was scattered across various countries, with most based in Australia. The establishment of the headquarters in China means that these employees have to relocate to Shanghai, according to Tchuruk, who added that no layoffs were required for the move.

Last March, Alcatel said it planned to cut 12,000 jobs worldwide as part of a massive restructuring at the same time that it announced flat operating profits for the previous year. In the fiscal year of 1998, Alcatel reported final operating income, excluding one-time gains, of 997 million euros (US$1.1 billion), up slightly from 900 million euros in 1997.

In addition to the establishment of its regional headquarters, Alcatel also plans to expand its China R&D facilities, which previously served only local manufacturing needs. The expanded R&D centers will cater to worldwide markets, said Ron Spithill, Alcatel's Asia Pacific president, who heads the Shanghai headquarters, adding that the number of R&D staff in the country will be doubled to 2,000 in the coming years.

"With the exchange rate stabilized and stock market back to the pre-1997 level, we have confidence in the economic growth in Asia-Pacific. It will become a major pillar in Alcatel's global business," said Tchuruk. Currently, Europe and North America make up about 30 percent and 20 percent, respectively, of Alcatel's entire business. Tchuruk would not estimate the percentage of the company's total revenue that comes from Asia-Pacific, but he described Asian markets as a "rising star."

Traditionally strong in manufacturing network switching products, Alcatel is late to the Internet telephony market, Tchuruk admitted. Yet he maintained that the company is the strongest newcomer in IP networking. "We're strong in transitioning [IP] solutions for our installed base," he said. Tchuruk added that the company was also relatively late to the mobile phone market, but it eventually managed to come back over time.

"In 1996, we were nowhere. Now we've sold 20 million handsets. Alcatel can be a surprising company," he said.

Last year, to increase its U.S. presence and better position itself to grab a piece of the IP networking market, Alcatel went on a buying spree and acquired five U.S. start-up companies that provide technology, management, and engineering products and services for IP networks.

According to company information, Alcatel has established 17 joint ventures and five wholly owned companies in China that produce a range of telecommunications equipment and services, including public switching systems, optical-fiber transmission systems, radio communications networks, and network management systems. The company recently announced plans to manufacture Global System for Mobile communications (GSM) phones in Suzhou.

Alcatel, in Paris, can be reached at +33-1-40-76-10-10 or on the World Wide Web at http://www.alcatel.com/.

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