Paris-based equipment manufacturer Alcatel and Italian aerospace and defence group Finmeccanica have agreed to merge their European satellite operations to create the third largest group in the world behind Lockheed Martin and Boeing of the US. Under the deal, two joint ventures will be created: Alcatel Alenia Space, which will be 67% owned by the French partner and handle the group’s space manufacturing activities; and a smaller group, which will be 67% owned by the Italian firm and will bring together the group’s services interests. Alcatel Alenia Space will have annual revenues f EUR1.8 billion while the Italian-controlled unit is expected to post annual turnover of EUR350 million. The joint venture agreement comes after two years of protracted negotiations and could herald further consolidation in the industry. Both Alcatel and Finmeccanica have said they are open to talks about the European Aeronautic Defence and Space company’s Astrium unit joining the venture.