Bad news x2 for Alca-Lu

11 May 2010

It is being reported that Alcatel-Lucent (Alca-Lu) has offered NZD100 million (USD73 million) to Telecom New Zealand as compensation for the series of network outages earlier this year. Citing unnamed sources, the BusinessDay newspaper said that a compensation deal was discussed when Alcatel-Lucent chief executive Ben Verwaayen visited Telecom executives in Auckland last week. Telecom chief executive Paul Reynolds and Alcatel-Lucent declined to comment. ‘We are working on any issues in our contract confidentially and privately as we should,’ Reynolds told the newspaper. An independent report into the network problems by Analysys Mason advised Telecom to slow down migrating customers to the W-CDMA based network until necessary upgrades have been completed. The report added that the weak link in the network appeared to be the Radio Network Controller (RNC) in Christchurch, but noted that customer traffic at launch was within Telecom’s own predictions. The company has since increased the capacity of its RNCs.

Across the world, Costa Rican state-owned telco ICE has filed a lawsuit in a US court for damages against Alca-Lu relating to a bribery and corruption scandal in an infrastructure contract the French/US company won in 2001. ICE has filed the complaint with Florida’s Miami-Dade county circuit court, for violations of civil racketeering and other Florida laws. If successful, the lawsuit will allow ICE to recover three times the amount of its damages.

Earlier this year, Alcatel-Lucent reached an agreement with the US justice department and the US securities regulator SEC, whereby it admitted to violations of the US Foreign Corrupt Practices Act – which generally prohibits bribing foreign officials – and will pay criminal fines of over USD137 million in order to avoid criminal prosecution and an SEC enforcement action, a statement read. In March this year, Alcatel Lucent paid the Costa Rican government USD10 million to settle the corruption case. The company was accused of bribing officials including former Costa Rican President Miguel Angel Rodriguez to win a USD149 million contract to install 400,000 GSM lines. Last month, more than five years since his initial arrest, Rodriguez went on trial for charges of extortion and corruption. Rodriguez resigned his post as secretary general of the Organisation of American States (OAS) when the corruption charges were filed in 2004. According to the public prosecutor’s office, Rodriguez received more than USD600,000 in payments from Alca-Lu in exchange for helping the company win the contract.