China’s Ministry of Information Industry (MII) and Alcatel will sign a Memorandum of Understanding (MOU) today to create Alcatel Shanghai Bell (ASB), a company that will integrate Alcatel’s key operations in China with Shanghai Bell.
Alcatel will hold 50 percent plus one share in Alcatel Shanghai Bell (ASB) with Chinese entities taking the remaining shares. ASB will offer Alcatel’s portfolio of products to Chinese operators and will be a leading supplier to the China market.
ASB will more than double the number of research and development engineers currently in Alcatel China, Shanghai Bell and Shanghai Bell Alcatel Mobile Communication combined, giving it 3,500 engineers in three years time.
ASB will also become one of Alcatel’s major global R&D centers. Core technologies to be developed by ASB for domestic and global markets include next generation fixed and mobile networks.
Alcatel expects ASB to export more than US$ 1 billion in its first three years of operation.
In forming ASB, Alcatel is the first international telecom equipment supplier to consolidate its businesses in China in a single company. Alcatel will also be the first international company to establish a Chinese company limited by shares in the telecommunications sector. The legal structure of a company limited by shares allows ASB to be listed in China in the future should it so desire.
Alcatel expects ASB to achieve $2 billion in sales in the first year of operation. The new company will immediately have a positive impact on Alcatel’s earnings per share (EPS) in 2002 before any additional sales.
Under the Chinese agreement, Alcatel will acquire from the Chinese shareholder, 10 percent plus one share of Shanghai Bell. Via a separate agreement Alcatel will also purchase the entirety of the Belgian Government’s 8.35 percent stake in Shanghai Bell.
At the conclusion of the two transactions, Alcatel will own 50 percent and one share, an increase from the current 31.65 percent. Alcatel will pay a total of $312 million in cash for the two transactions.
The establishment of ASB is subject to the final approval of China’s relevant authorities.
Alcatel China, Shanghai Bell and Shanghai Bell Alcatel Mobile Communication will at closing be integrated into ASB. All of Alcatel’s other telecom subsidiaries in China will be integrated into ASB within 24 months of its establishment.