Alcatel-Lucent XT compo payments to Telecom hit $41 million – and counting

French connection.

It’s the outage that keeps on giving.

In its half year result announced this morning, Telecom earnings were boosted by a $14 million “supplier compensation” payment.

Telecom was coy on the source of the payment, but it can only be from the company’s bungling XT network partner, Alcatel-Lucent.

Last quarter, Telecom recorded a $27 million payment, labelled as settlement from a supplier which, again, could only have been Alcatel-Lucent.

$41 million – and more to come
That means, so far, the Franco-American telecommunications infrastructure company has paid Telecom $41 million in compensation for outages that plagued XT between December 2009 and February 2010.

“So far” is the operative phrase here.

Industry scuttlebutt (Telecom won’t comment) holds that Alcatel-Lucent has agreed to total reparations of $100 million.

This morning, at Telecom’s results briefing, analysts repeatedly asked if more “supplier settlements” were on the way.

“There will always be supplier settlements from time-to-time,” Telecom chief executive Paul Reynolds said at one point. “I think we're going to have some more in future."

FLASHBACK: February 26, 2010: Telecom chief executive Paul Reynolds (centre, flanked by Gen-i boss Chris Quin, left, and retail head Alan Gourdie) puts Alcatel-Lucent "on notice".

$15 million in kind to customers
Telecom offered its customers a total $15 million in compensation after the four major XT outages, some of it in the form of a 50% discount that only applied if a customer stayed “loyal” for at least three months.

The company also suffered brand damage, slower than anticipated XT uptake, and in some instances took a revenue hit as big customers leveraged the incident to gain better contract terms.

Didn't touch the sides
Assuming the supplier payments came from Alcatel-Lucent (and Telecom has no other supplier approaching its scale, or with such reason to pay), they didn't touch the sides.

Overnight, Alcatel-Lucent announced it had earned reported a net profit of euro340 million for its December quarter, up from €46 million in the year-ago period.

Revenue rose 23% to €4.9 billion.

Full-year revenue  €15.98 billion (up 5.5%). The company made a net full-ear loss of €334 million - it's fifth straight year in the red, but a better than the €524 million loss reported last year.

According to one newspaper's count, a culmulative €9 billion has been lost since New Jersy-based Lucent merged with the Parisian Alcatel iin 2006.

Ambition: to become normal
Alcatel-Lucent chief executive Ben Verwaayen - whom conspiracy theorists often note was Dr Reynolds boss during his time at BT - was quoted in the FT saying he was “more confident than ever in our ability to transform into a normal company”.

Under the circumstances, what's $100 million between friends?

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2 Comments & Questions

Commenter icon key: Subscriber Verified

Telecom is well known for squeezing its suppliers...
Sure that Alcatel-Lucent was not innocent in the disaster (it must have poorly operated Telecom network to achieve such a lengthy outage). But Telecom bear also responsibility in their choice of architecture and solution and in the way they drove their supplier, focusing more on marketing than reliability.

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Alcatel is under pressure in various countries over its vendor arrangements with corruption probes in malaysia http://biz.thestar.com.my/news/story.asp?file=/2011/3/2/business/8168332... and Bulgaria with Vivacom http://www.sofiaecho.com/2011/02/27/1051219_bulgarias-government-to-audi...

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