To LRO Members:

 

Subject: The LRO Board’s View of How Retiree Shareholders Should Vote on the Merger of Alcatel and Lucent

 

Lucent has begun distributing to its shareowners the proxy proposal for the Alcatel acquisition/merger that will be voted on at a special meeting of Lucent shareowners on September 7, 2006 in Wilmington, Delaware.  It has been announced that the combined company will be renamed “Alcatel Lucent” upon completion of the merger.

 

Ever since Lucent and Alcatel announced their agreement on April 2, 2006, the LRO has been trying to learn as much as possible about the potential impact on retirees of Lucent becoming a wholly owned subsidiary of Alcatel.

 

Although information sought from Lucent has been limited due to the company’s claim of tight securities regulations, the LRO has obtained guidance from attorneys with expertise in acquisitions/mergers and in ERISA (Employee Retirement Income Security Act) law that governs pension plans for America’s workers and retirees. We have learned that Lucent, as a U.S. subsidiary of Alcatel, must continue to abide by the same ERISA pension laws as it has in the past.  Therefore, there should be no change to Lucent’s pension funding obligations under ERISA.

 

With regard to health care and life insurance benefits, the future status for these welfare benefits is unclear.  It is particularly uncertain for retirees who do not come under the national labor agreements. Lucent—going into the merger—continues to take the same position as it has for the past few years.  That is, the company is concerned about the rising costs for health care coverage for retirees.  Lucent has repeatedly stated it will continue managing the costs of health care for eligible retirees, while balancing the needs of retirees with funding levels that would enable the company to remain a viable competitor.

 

Industry and financial analysts have said that consolidation among communications systems suppliers is inevitable.  Lucent and Alcatel are on the leading edge of this forecasted movement.  Assuming that analysts’ predictions are accurate that shareowners will support the acquisition/merger, we will be disappointed to see the era of Western Electric/AT&T Network Systems/Lucent Technologies come to an end.  The LRO Board believes that a vote supporting this unavoidable change is the course of action to take for LRO members who are Lucent shareowners. 

 

Ken Raschke, LRO President

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