Telecom Lead Europe: Alcatel-Lucent has unveiled The Shift Plan that will reposition the company from a telecommunications equipment generalist to an industrial specialist in IP Networking and Ultra-Broadband Access (mobile and fixed) at the heart of next-generation networks.
The initiative will focus on Group innovation with IP Networking and Ultra-Broadband Access representing 85 percent of R&D investment in 2015, Alcatel-Lucent said.
The company will apply a differentiated management approach to Core Networking segment (IP routing, IP transport, IP platforms and associated services) businesses managed for growth, and Access segment- including wireless and fixed access – and “other “ segment, managed for cash and focused on Ultra-Broadband Access.
The Shift Plan entails a clearly differentiated approach to the management of high-growth businesses – Core Networking as opposed to those that will be managed with cash generation as the clear priority. The ‘managed for cash’ businesses will include key wireless, fixed access and other businesses that will play an important role in the Company’s medium and long-term development.
Specifically, the Company expects that this will create enhanced opportunities for its LTE and ‘FTTx’ businesses. The Shift Plan will capitalize on Alcatel-Lucent’s recognized innovation assets, particularly its research laboratories, Bell Labs, while equipping the Company with the appropriate means to fulfill its ambitions.
The company targets Euro 1 billion in reductions in the Group’s fixed cost structure concentrated on actions to reduce sales, general and administrative (SG&A) expenses, refocus R&D and improve operational efficiencies. Selective asset sales intended to generate at least Euro 1 billion over the period of the plan.
Further Alcatel -Lucent aims at re-profiling the Group’s debt (Euro 2 billion) and, once the Company has clearly demonstrated the successful execution of The Shift Plan, a future reduction in debt (Euro 2 billion), to guarantee over the long-term financial sustainability.
Commenting on The Shift Plan, Alcatel-Lucent CEO Michel Combes said, “The Shift Plan is fundamentally an industrial plan that also addresses the Group’s operational and financial challenges by putting in place a strong and fully accountable leadership team with clear goals and the appropriate levers to deliver on these goals and on our commitments to all stakeholders.”
Under The Shift Plan, Alcatel-Lucent is planning to grow its revenues in Core Networking by more than 15 percent, from Euro 6.1 billion in 2012 to over Euro 7 billion in 2015, while lifting its operating margins in this segment from 2.4 percent in 2012 to more than 12.5 percent in 2015.
Over the same period, a strategic focus on cash management in wireless, fixed access and other businesses – emphasizing investment in 4G LTE, vectoring and fiber-based access systems while significantly reducing R&D spending on legacy technologies – is expected to deliver positive segment operating cash flow of more than Euro 250 million in 2015.
The company also appointed Philippe Guillemot as senior executive vice president, Operations. Alcatel-Lucent’s management structure will be reorganized into four main business lines: IP Routing & Transport, IP Platforms, Wireless and Fixed Networks. These businesses will be supported by group-wide functions focused on Operations, Sales and Strategy & Innovation.
Alcatel-Lucent also plans to focus its Wireless and Fixed Access businesses on Ultra-Broadband access and manage these businesses – as well as its Other Businesses Segment – for their ability to generate cash under the plan.
The Shift Plan reflects fast-changing trends in the telecommunications industry, where service providers and large-scale Internet concerns handle ever-expanding volumes of data as the market migrates from networks built largely for voice communications.
Alcatel-Lucent is adapting to the evolving market by placing its IP, cloud and ultra-broadband portfolio at the center of its operations. This will include WDM, 100G, IMS and customer experience product lines, as well as the ‘FTTx’ group of fiber-based connectivity technologies serving homes, businesses and other types of premises, vectoring, the 4G LTE mobile wireless access and small-cells.
As part of this new organization, the Company will be managed by a new Leadership Team headed by CEO Michel Combes. Core people in the Business Lines include Basil Alwan, IP Routing & IP Transport; Andrew Mcdonald, IP Platforms; David Geary, Wireless; and Federico Guillen, Fixed Networks.
The Transversal functions team consists of Philippe Guillemot, Operations; Philippe Keryer, Strategy & Innovation; and Robert Vrij, Sales. The Corporate functions team consists of Nicole Gionet, Human Resources and Tim Keller, Legal
Paul Tufano, CFO of Alcatel-Lucent, will step down from his role once implementation of The Shift Plan is under way.
