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National Security Questions Answered in Lucent-Alcatel Merger

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National Security Questions Answered in Lucent-Alcatel Merger

The pending merger between Lucent and Alcatel will transfer ownership of the New Jersey based Bell Labs, which conducts sensitive U.S. government projects, to a French company (Alcatel). I recently participated in a hearing of the House Armed Services committee to review this merger, as it poses significant national security questions. In the hearing, I learned that the U.S. will exercise unprecedented control of the sensitive projects at Bell Labs. I support this merger because it is vital to the economic health of these two companies, and because matters of national security will have sufficient oversight by the U.S. government.

This merger has been through a rigorous review process, and I am confident that all the right questions have been asked by our intelligence agencies. It passed both security and antitrust reviews, and its final hurdle was the Committee on Foreign Investment in the U.S. (CFIUS) review. Based on CFIUS' recommendations, President Bush can only block a takeover of a U.S. company for a foreign company if there is "credible evidence that the foreign entity exercising control might take action that threatens national security." Such evidence was not found in this case, however, and the President approved the merger this past November.

I have included a recent article from the Star Ledger below with further information on this deal. Please know that I will continue to make our nation's economic and physical security my top priority.

U.S. keeping an eye on sensitive projects at Bell Labs
National security at issue in wake of merger
Sunday, November 19, 2006

Although a French company soon will own the famed Bell Labs, the U.S. will exercise "unprecedented" control over sensitive government projects at the New Jersey facility, U.S. Rep. Rob Andrews (D-1st Dist.) said yesterday.

"The U.S. government will be able to veto any people who have direct control over Bell Labs, and can veto the removal of any persons who have control over Bell Labs," said Andrews, who serves on the House Armed Services Committee and was briefed last week on the pending takeover of Lucent Technologies by Alcatel of France.

Bell Labs, birthplace of the transistor, was inherited from AT&T by Lucent a decade ago. The labs are centered in Murray Hill.

President Bush approved the merger of Lucent and Alcatel on Friday, based on a review by a multiagency federal panel called the Committee on Foreign Investment in the United States.

His approval hinges on both companies following through on "two robust and far-reaching agreements designed to ensure the protection of our national security," according to a statement from the White House. One of those agreements involves oversight of Bell Labs by three former top defense and intelligence officials.

Andrews said Bell Labs is involved with just about "anything that touches on imperatives for the country's security." But he called the merger of the two telecom companies vital for their economic health, "good for the country, and good for New Jersey."

"The U.S. government will have more control over the flow of information in and out of this entity than it has over the flow of information into other so-called American entities," Andrews said. "I think this is an unprecedented level of control, where the U.S. government will have an ongoing window into the management of Bell Labs."

Inder Singh, an analyst for Prudential Equity and a former Lucent executive, said it should not be hard for Bell Labs to segregate sensitive projects behind a "firewall."

"It won't be very different from what Bell Labs has done, historically," Singh said.

Lucent and Alcatel are aiming to close their deal on Nov. 30. The combined company, Alcatel Lucent, will be the largest supplier of equipment for mobile phone networks. It will be based in Paris, and employ 88,000 people at first. About 9,000 job cuts are expected later.

"We've gotten all the regulatory approvals we need and are just finalizing the last steps," said Lucent spokeswoman Joan Campion.

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