As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/24/15  Alcatel Lucent                    20-F       12/31/14    8:9.0M                                   Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 20-F        Annual Report 2014 on Form 20-F                     HTML   5.23M 
 2: EX-1.1      Underwriting Agreement                              HTML     60K 
 5: EX-13.1     Annual or Quarterly Report to Security Holders      HTML      8K 
 6: EX-13.2     Annual or Quarterly Report to Security Holders      HTML      8K 
 3: EX-12.1     Statement re: Computation of Ratios                 HTML     13K 
 4: EX-12.2     Statement re: Computation of Ratios                 HTML     13K 
 7: EX-15.1     Letter re: Unaudited Interim Financial Information  HTML     24K 
 8: EX-15.2     Letter re: Unaudited Interim Financial Information  HTML     25K 

1		Selected financial data					1
		1.1		Condensed consolidated income statement and statement of financial position data			3
		1.2		Exchange rate information			4
2		Activity overview					5
		2.1		Core Networking Segment			6
		2.2		Access Segment			7
		2.3		Other Segment			9
3		Risk factors					11
		3.1		Risks relating to the business			12
		3.2		Legal Risks			20
		3.3		Risks relating to ownership of our ADSs			21
4		Information about the Group					23
		4.1		General			24
		4.2		History and development			24
		4.3		Structure of the main consolidated companies as of December 31, 2014			28
		4.4		Real estate and equipment			29
		4.5		Material contracts			30
5		Description of the Group’s activities					33
		5.1		Business organization			34
		5.2		Core Networking segment			35
		5.3		Access Segment			39
		5.4		Other Segment			42
		5.5		Marketing, sales and distribution of our products			42
		5.6		Competition			42
		5.7		Technology, research and development			43
		5.8		Intellectual Property			45
		5.9		Sources and availability of materials			45
		5.10		Seasonality			46
		5.11		Our activities in certain countries			46
6		Operating and financial review and prospects					47
		6.1		Overview of 2014			52
		6.2		Consolidated and segment results of operations for the year ended December 31, 2014 compared to the year ended December 31, 2013			53
		6.3		Consolidated and segment results of operations for the year ended December 31, 2013 compared to the year ended December 31, 2012			58

Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. IFRS, as adopted by the European Union, differs in certain respects from the International Financial Reporting Standards issued by the International Accounting Standards Board. However, our consolidated financial statements presented in this document in accordance with IFRS would be no different if we had applied International Financial Reporting Standards issued by the International Accounting Standards Board.

The table below shows the average noon buying rate of euro for each year from 2010 to 2014. As used in this document, the term “noon buying rate” refers to the rate of exchange for the euro, expressed in U.S. dollars per euro, as certified by the Federal Reserve Bank of New York for customs purposes or, from 2014, the European Central Bank fixing at 2:30 pm Paris time.

 

Year		Average rate (1)
2014		U.S.$	1.3211
2013		U.S.$	1.3303
2012		U.S.$	1.2909
2011		U.S.$	1.4002
2010		U.S.$	1.3209

 

(1)

The average of the noon buying rate for euro on the last business day of each month during the year.

Our business, financial condition or results of operations could suffer material adverse effects due to any of the following risks. We have described the specific risks that we consider material to our business but the risks described below are not the only ones we face. We do not discuss risks that would generally be equally

The Shift Plan may not yield intended results, and we may not be able to transform ourselves successfully into a cash generative business.

The goal of The Shift Plan is to transform our Company into an IP and cloud networking and ultra-broadband specialist refocused on innovation, transformation and unlocking growth to become a cash generative business from 2015. The Shift Plan contemplates, among other things, fixed cost savings of €950 million in 2015 compared to our 2012 cost base (at constant exchange rates) and €1 billion of cash generated from 2013 through 2015 as a result of asset dispositions, as well as our debt reprofiling by €2 billion and a reduction in our overall level of debt by €2 billion. While we believe that successful implementation of The Shift Plan is critical to our business and our ability to transform into a cash generative business, our ability to achieve the goals set out in The Shift Plan (described in Section 6.6 “Strategy and Outlook”) depends on a number of factors, many of which are beyond our control. These goals are also based on assumptions with respect to the future business environment and/or decisions that are subject to change.

Factors that may prevent a successful implementation of The Shift Plan and achievement of the goals underlying The Shift Plan include the following:

 

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our expectations with respect to market growth, customer demand and other trends in the industry in which we operate, as well as our ability to benefit from these trends, may prove to be inaccurate, and changes in the global economy may impact our ability to implement The Shift Plan;

 

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in a highly competitive market, our ability to successfully develop new and improve existing products, market our products to new or existing customers, enter new markets and otherwise grow our businesses as contemplated may fall short of targets, and we may not be able to successfully or completely transform ourselves into an IP and cloud networking and ultra-broadband specialist within the timeframe contemplated by The Shift Plan;

 

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organizational changes related to the implementation of The Shift Plan require the alignment and adjustment of resources, systems and tools, which if not completed in a structured manner could impact our ability to achieve goals contemplated by The Shift Plan;

 

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our projected cost savings and ability to achieve the efficiencies contemplated by The Shift Plan may fall short of our targets or otherwise not occur;

The telecommunications industry fluctuates and is affected by many factors, including the economic environment, decisions by service providers and other customers that buy our products and services regarding their deployment of technology and their timing of purchases and roll-out, as well as demand and spending for communications services by businesses and consumers.

Spending trends in the global telecommunications industry were mixed in 2014 where the continued growth in smartphone penetration, mobile data and all-IP network transformation led to increased spending in IP and ultra-broadband access technologies, including certain regional growth in 4G LTE wireless technologies, mainly the United States and China, while other regions and countries such as Europe started to show signs of improvement as the year came to an end. Actual market conditions could be very different from what we expect and are planning for due to the uncertainty that exists about the recovery in the global economy. Moreover, market conditions could vary geographically and across different technologies, and are subject to substantial fluctuations. Conditions in the specific industry segments in which we participate may be weaker than in other segments. In that case, the results of our operations may be adversely affected.

If capital investment by service providers and other customers that buy our products and services is weaker than we anticipate, our revenues and profitability may be adversely affected. The level of demand by service providers and other customers that buy our products and services can change quickly and can vary over short periods of time, including from month to month. As a result of the uncertainty and variations in the telecommunications industry, accurately forecasting revenues, results and cash flow remains difficult.

In addition, our sales volume as well as product and geographic mix will affect our gross margin. Therefore, if reduced demand for our products results in lower than expected sales volume, or if we have an unfavorable product or geographic mix, we may not achieve the expected gross margin, resulting in lower than expected profitability. These factors may fluctuate from quarter to quarter.

Our business requires a significant amount of cash, and we may require additional sources of funds if our sources of liquidity are unavailable or insufficient to fund our operations.

Our working capital requirements and cash flows historically have been, and they are expected to continue to be, subject to quarterly and yearly fluctuations, depending on a number of factors. If we are unable to manage fluctuations in cash flow, our business, operating results and financial condition may be materially adversely affected. Factors which could lead us to suffer cash flow fluctuations include:

 

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the level of sales and profitability;

 

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the effectiveness of inventory management;

 

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the collection of receivables and the payment terms variations;

 

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the timing and size of capital expenditures;

expect that we will provide or commit to provide financing where appropriate for our business. Our ability to arrange or provide financing for our customers will depend on a number of factors, including our credit rating, our level of available credit, and our ability to sell off commitments on acceptable terms. More generally, we expect to routinely enter into long-term contracts involving significant amounts to be paid by our customers over time. Pursuant to these contracts, we may deliver products and services representing an important portion of the contract price before receiving any significant payment from the customer. As a result of the financing that may be provided to customers and our commercial risk exposure under long-term contracts, our business could be adversely affected if the financial condition of our customers erodes. In the past, certain of our customers have sought protection under the bankruptcy or reorganization laws of the applicable jurisdiction, or have experienced financial difficulties. We cannot predict how that situation may evolve in 2015, when we expect uncertain economic conditions to continue. Upon the financial failure of a customer, we may experience losses on credit extended and loans made to such customer, losses relating to our commercial risk exposure, and the loss of the customer’s ongoing business. If customers fail to meet their obligations to us, we may experience reduced cash flows and losses in excess of reserves, which could materially adversely impact our results of operations and financial position.

Our financial condition and results of operations may be harmed if we do not successfully reduce market risks, including through the use of derivative financial instruments.

Since we conduct operations throughout the world, a substantial portion of our assets, liabilities, revenues and expenses are denominated in various currencies other than the euro and the U.S. dollar. Because our financial statements are denominated in euros, fluctuations in currency exchange rates, especially the U.S. dollar, or currencies linked to the U.S. dollar, against the euro, could have a material impact on our reported results on a quarterly or annual basis.

We also experience other market risks, including changes in interest rates and in prices of marketable securities that we own. We may use derivative financial instruments to reduce certain of these risks. If our strategies to reduce market risks are not successful, our financial condition and operating results may be harmed.

An impairment of other intangible assets or goodwill would adversely affect our financial condition or results of operations.

We have a significant amount of goodwill and intangible assets, including acquired intangibles, development costs for software to be sold, leased or otherwise marketed and internal use software development costs, notably in connection with the combination between Alcatel and Lucent. Goodwill and intangible assets with indefinite useful lives are not amortized but are tested for impairment annually, or more often, if an event or circumstance indicates that an impairment loss may have been incurred. Other intangible assets are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever events such as product discontinuances, plant closures, product dispositions or other changes in

Technology drives our products and services. If we fail to keep pace with technological advances in the industry, or if we pursue technologies that do not become commercially accepted, customers may not buy our products or use our services.

The telecommunications industry uses numerous and varied technologies and large service providers often invest in several and, sometimes, incompatible technologies. The industry also demands frequent and, at times, significant technology upgrades. Furthermore, enhancing our services revenues requires that we develop and maintain leading tools. We will not have the resources to invest in all of these existing and potential technologies. As a result, we concentrate our resources on those technologies that we believe have or will achieve substantial customer acceptance and in which we will have appropriate technical expertise. However, existing products often have short product life cycles characterized by declining prices over their lives. In addition, our choices for developing technologies may prove incorrect if customers do not adopt the products that we develop or if those technologies ultimately prove to be unviable. Our revenues and operating results will depend, to a significant extent, on our ability to maintain a product portfolio and service capability that is attractive to our customers; to enhance our existing products; to continue to introduce new products successfully and on a timely basis and to develop new or enhance existing tools for our services offerings.

The development of new technologies remains a significant risk to us, due to the efforts that we still need to make to achieve technological feasibility, due – as mentioned above – to rapidly changing customer markets; and due to significant competitive threats.

Our failure to bring these products to market in a timely manner could result in a loss of market share or a lost opportunity to capitalize on new markets for emerging technologies, and could have a material adverse impact on our business and operating results.

We depend on a limited number of internal and external manufacturing organizations, distribution centers and suppliers. Their failure to deliver or to perform according to our requirements may adversely affect our ability to deliver our products, services and solutions on time and in sufficient volume, while meeting our quality, safety or security standards.

Our manufacturing strategy is built upon two primary sources of production: predominantly, external manufacturing suppliers, and also internal manufacturing locations. When we resort to external manufacturing, the primary owner of inventory, standard manufacturing equipment and common test equipment is the external manufacturer, but in the vast majority of cases we own the custom-made test equipment, which would allow us to change manufacturing locations more easily if this became necessary. The manufacturing equipment and common and custom-made test equipment in our internal manufacturing locations are owned by us.

We are in the process of outsourcing a significant portion of our finance and human resources (HR) processes and services, increasing our dependence on the reliability of external providers. Interruptions in the availability of these processes and services could have a material adverse impact on the responsiveness and quality of these processes and services that are crucial to our business operations, and on our future ability to adapt to changing business needs.

Due to the customized nature of the services outsourced in the area of finance and HR, a failure to structure an efficient relationship with the outsourcing company we have selected may lead to on-going operational problems or even to severe business disruptions. In addition, as management’s focus shifts from a direct to an indirect operational control in these areas, there is a risk that without active management and monitoring of the relationship, the services provided may be below appropriate quality standards. There is the added risk that the outsourcing company may not meet the agreed service levels, in which case, depending on the impacted service, the contractual remedies may not fully cure all of the damages we may suffer. This is particularly true for any deficiencies that would impact the reporting requirements applicable to us as a company listed on Euronext NYSE in Paris and the NYSE in New York.

In order to implement this outsourcing, changes in our business practices and processes will be required to capture economies of scale and operational efficiencies, and to reflect a different way of doing business. Consequently, business processes that were customized for individual business units or for the Group will be converted to a more standardized format. During the transition to outsourcing, our employees will need to train the outsourcing company’s staff or get trained on the outsourcing company’s systems, potentially resulting in the distraction of our human resources. Adjustments to staff size and transfer of employees to the outsourcing companies could impact morale and raise complex labor law issues, which we would seek to address, but the adverse effects of which might impact the business case for this outsourcing. If inadequately handled, the transition may result in the loss of certain personnel who are highly skilled and familiar with our practices and requirements.

There is also a risk that, in spite of our independent validation of the control procedures, we may not be able to determine whether controls have been effectively implemented, and whether the outsourcing company’s performance monitoring reports are accurate. Concerns equally could arise from giving third parties access to confidential data, strategic technology applications, and the books and records of the Group.

In the longer term, this type of organization potentially creates a dependency on the outsourcing company. This dependency may increase over time, since our ability to learn from day-to-day responsibilities and hands-on experience, and from responding to changing business needs, may be diminished.

Although we have selected a reputable company to provide the outsourced finance and HR services, and are working closely with it to identify risks and implement measures to minimize them, we cannot give assurances that the availability of the processes and services upon which we rely will not be

and in coordination with our suppliers and business partners. We are also increasing the resources allocated in this area. However, there is no guarantee that our existing procedures or the improvement programs will be sufficient to prevent future security breaches or cyber attacks. In addition, as we have outsourced a significant portion of our information technology operations and other operations, we are also subject to vulnerabilities attributable to such third parties. Information technology is rapidly evolving, the techniques used to obtain unauthorized access or sabotage systems change frequently and the parties behind cyber attacks and other industrial espionage are believed to be sophisticated and well funded, and it is not commercially or technically feasible to mitigate all known vulnerabilities in a timely manner or to eliminate all risk of cyber attacks and data breaches. Unauthorized access to or modification, misappropriation or loss of, our intellectual property and confidential information could result in litigation and potential liability to customers, suppliers and other third parties, harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or damage our brand and reputation, which could materially adversely affect our business, results of operations or financial condition. In addition, the cost and operational consequences of implementing further information system protection measures could be significant. We may not be successful in implementing such measures, which could cause business disruptions and be more expensive, time consuming and resource-intensive. Such disruptions could adversely impact our business.

Because our business operations, including those we have outsourced, rely on our complex IT systems and networks (and related services), our reliance on the precautions taken by external companies to insure the reliability of our and their IT systems, networks and related services is increasing.

Despite these precautions, our business is susceptible to disruption from IT equipment failure, vandalism, cyber attacks, natural disasters, power outages and other events affecting the IT systems, networks and related services we manage, as well as third party systems. Although we have selected reputable companies to provide outsourced IT systems and services, and have worked closely with them to identify risks and implement countermeasures and controls, we cannot be sure that interruptions will not occur in the availability of the IT systems and services upon which we rely, with material adverse impacts on our business operations.

Many of our current and planned products are highly complex and may contain defects or errors that are detected only after deployment in telecommunications networks. If that occurs, our reputation may be harmed.

Our products are highly complex, and we cannot assure you that our extensive product development, manufacturing and integration testing is, or will be, adequate to detect all defects, errors, failures and quality issues that could affect customer satisfaction or result in claims against us. As a result, we might have to replace certain components and/or provide remediation in response to the discovery of defects in products that have been shipped.

The occurrence of any defects, errors, failures or quality issues could result in cancellation of orders, product returns, diversion

We have long-term sales agreements with a number of our customers. Some of these agreements may prove unprofitable as our costs and product mix shift over the lives of the agreements.

We have entered into long-term sales agreements with a number of our large customers, and we expect that we will continue to enter into long-term sales agreements in the future. Some of these existing sales agreements require us to sell products and services at fixed prices over the lives of the agreements, and some require, or may in the future require us to sell products and services that we would otherwise discontinue, thereby diverting our resources from developing more profitable or strategically important products. Since The Shift Plan entails a streamlined set of product offerings, it may increase the likelihood that we may have to sell products that we would otherwise discontinue. The costs incurred in fulfilling some of these sales agreements may vary substantially from our initial cost estimates. Any cost overruns that cannot be passed on to customers could adversely affect our results of operations.

We have significant international operations and a significant amount of our revenues is earned in emerging markets and regions.

In addition to the currency risks described elsewhere in this section, our international operations are subject to a variety of risks arising out of the economy, the political outlook and the language and cultural barriers in countries where we have operations or do business. We expect to continue expanding business in emerging markets in Asia, Africa, Middle East, Latin America and Eastern Europe. In many of the countries in these emerging markets, we may be faced with several risks that are more significant than in other countries. These risks include economies that may be dependent on only a few products and are therefore subject to significant fluctuations, weak legal systems which may affect our ability to enforce contractual rights, possible exchange controls, international trade restrictions, unstable governments and privatization actions or other government actions affecting the flow of goods and currency. Also, it is possible that political developments in certain countries in the Middle East and North Africa and other countries, may have, at least temporarily, a negative impact on our operations in those countries, with an increased risk of heightened conflicts and terrorism. For this reason, we may not be potentially able to enter into, manage or terminate contracts for a particular country or to work in a particular country during a period of time.

The Group’s U.S. pension and post-retirement benefit plans are large and have funding requirements that fluctuate based on how their assets are invested, the performance of financial markets worldwide, interest rates, assumptions regarding the life-expectancy of covered employees and retirees, medical price increases, and changes in legal requirements. Even if these plans are currently fully funded, they are costly, and our efforts to satisfy further funding requirements or control these costs may be ineffective.

Many former and current employees and retirees of the Group in the U.S. participate in one or more of our major defined benefit pension and welfare benefit plans that provide post-retirement

Pension and post-retirement health plan participants may live longer than has been assumed, which would result in an increase in our benefit obligation.

For pension funding purposes, we use the mortality table issued by the Internal Revenue Service (IRS) which includes fifteen years of projected improvements in life span for active and former employees not yet receiving pension payments, and seven years for retirees receiving payments. For accounting purposes, we used the RP-2000 Combined Health Mortality table with Generational Projection based on the U.S. Society of Actuaries Scale AA until September 30, 2014. Starting December 31, 2014, we changed these assumptions to the RP-2014 White Collar table with MP-2014 mortality improvement scale for Management records and the RP-2014 Blue Collar table with MP-2014 mortality improvement scale for Occupational records. These tables determine the period of time over which we assume that benefit payments will be made. The longer the period, the larger the benefit obligation and the amount of assets required to cover that obligation.

To estimate our future U.S. retiree healthcare plan obligations, we used the same RP-2000 Combined Health Mortality table with Generational Projection based on the U.S. Society of Actuaries Scale AA that we used for pension funding purposes until September 30, 2014. Starting December 31, 2014, we similarly changed these assumptions to the RP-2014 White Collar table with MP-2014 mortality improvement scale for Management records and the RP-2014 Blue Collar table with MP-2014 mortality improvement scale for Occupational records. As with pension benefits, longer lives of our participants would likely increase our retiree healthcare benefit obligation. We cannot be certain that the longevity of our participants in our retiree healthcare plans or pension plans will not exceed that indicated by the mortality tables we currently use, or that future updates to these tables will not reflect materially longer life expectancies.

The new mortality rates (RP-2014 White Collar and Blue Collar) and new mortality improvement scale (MP-2014) were published by the U.S. Society of Actuaries on October 27, 2014. Because at that time the IRS (which oversees regulatory funding requirements for U.S. tax-qualified plans) had already issued its mortality assumptions for the 2015 plan year, the new assumptions are not expected to become effective for regulatory funding purposes before at least the 2016 plan year.

We may not be able to fund the healthcare and group life insurance costs of our formerly represented retirees with excess pension assets in accordance with Section 420 of the U.S. Internal Revenue Code.

We are currently funding, and expect to continue to fund, our current healthcare and group life insurance costs for retirees who were represented by the Communications Workers of America and the International Brotherhood of Electrical Workers with transfers of excess pension assets from our U.S. inactive

We are involved in lawsuits which, if determined against us, could require us to pay substantial damages.

We are defendants in various lawsuits including in connection with commercial, intellectual property, environmental and labor matters. We cannot predict the extent to which any of the pending or future actions will be resolved in our favor, or whether significant monetary judgments will be rendered against us. Any material damages resulting from these lawsuits could adversely affect our profitability and cash flow.

We have been, and continue to be, involved in investigations concerning alleged violations of anti-corruption laws, and have been, and could again be, subject to material fines, penalties and other sanctions as a result of such investigations.

Anti-corruption laws in effect in many countries prohibit companies and their intermediaries from making improper payments to public officials for the purpose of obtaining new business or maintaining existing business relationships. Certain anti-corruption laws such as the U.S. Foreign Corrupt Practices Act (the “FCPA”) also require the maintenance of proper books

and records, and the implementation of controls and procedures in order to ensure that a company’s operations do not involve corrupt payments. Since we conduct operations throughout the world, and given that some of our clients are government-owned entities and that our projects and contracts often require approvals from public officials, there is a risk that our employees, consultants or agents may take actions that are in violation of our Group’s policies and of anti-corruption laws.

In the past, we have already experienced actual or alleged violations of anti-corruption laws, including of the FCPA. As a result, we had to pay substantial amounts to the U.S. Securities and Exchange Commission (the “SEC”) in disgorgement of profits and interest, and to the U.S. Department of Justice (the “DOJ”) in criminal fines. In 2010, we signed a deferred prosecution agreement (the “DPA”) with the DOJ, pursuant to which the prosecution for violations of the internal controls and books and records provisions of the FCPA would be deferred for the term of the DPA. Among other things, the DPA contained provisions requiring the engagement of a French anticorruption compliance monitor (the “Monitor”). We worked with the Monitor to implement his recommendations, most of which were focused on strengthening the resources dedicated to the “Compliance” organization of our Group, and on enhancing and expanding our policies and procedures, including those we use when we retain third parties (such as distributors and suppliers).

On December 8, 2014, the Monitor submitted his final report and certified that Alcatel Lucent’s compliance program, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations of anti-corruption laws within Alcatel Lucent as defined in and required by the DPA. Following receipt of the Monitor’s final report, the DOJ filed a motion to dismiss with prejudice the FCPA charges underlying the DPA, which the court granted on February 9,

products. Further, if one of our important patents or other intellectual property rights is invalidated, we may suffer losses of licensing revenues and be prevented from attempting to block others, including competitors, from using the related technology.

We are involved in significant joint ventures and are exposed to problems inherent to companies under joint management.

We are involved in significant joint venture companies. The related joint venture agreements may require unanimous consent or the affirmative vote of a qualified majority of the shareholders to take certain actions, thereby possibly slowing down the decision-making process. Our largest joint venture, Alcatel-Lucent Shanghai Bell Co., Ltd, has this type of requirement. We own 50% plus one share of Alcatel-Lucent Shanghai Bell Co., Ltd, the remainder being owned by the Chinese government.

The trading price of our ADSs and any dividends paid on our ADSs may be affected by fluctuations in the exchange rate for converting euro into U.S. dollars.

Our ADSs trade in U.S. dollars and our ordinary shares trade in euro. Accordingly, fluctuations in the exchange rate for converting euro into U.S. dollars may affect the market price of our ADSs. In addition, if and when we pay dividends, the dividends would be denominated in euro. The amount received by holders of our ADSs following conversion by the depositary of any cash dividend would depend on the exchange rate between the euro and the U.S. dollar. Furthermore, to the extent that we engage in a merger, tender offer or similar transaction that is denominated in a currency other than the U.S. dollar, the amount received by holders of our ADSs could be affected by fluctuations in the corresponding exchange rate for U.S. dollars.

If a holder of our ADSs fails to comply with the legal notification requirements upon reaching certain ownership thresholds under French law or our governing documents, the holder could be deprived of some or all of the holder’s voting rights and be subject to a fine.

French law and our governing documents require any person who owns our outstanding shares or voting rights in excess of certain amounts specified in the law or our governing documents to file a report with us upon crossing this threshold percentage and, in certain circumstances, with the French stock exchange regulator (Autorité des Marchés Financiers). If any shareholder fails to comply with the notification requirements:

 

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The shares or voting rights in excess of the relevant notification threshold may be deprived of voting power on the demand of any shareholder;

 

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All or part of the shareholder’s voting rights may be suspended for up to five years by the relevant French commercial court; and

As a foreign private issuer, we are not required to comply with the notice and disclosure requirements under the Securities Exchange Act of 1934, as amended, relating to the solicitation of proxies for shareholder meetings. Although we are subject to the periodic reporting requirements of the Exchange Act, the periodic disclosure required of non-U.S. issuers under the Exchange Act is more limited than the periodic disclosure required of U.S. issuers. Therefore, there may be less publicly available information about us than is regularly published by or about most other public companies in the United States.

Judgments of U.S. courts, including those predicated on the civil liability provisions of the federal securities laws of the United States in French courts, may not be enforceable against us.

An investor located in the United States may find it difficult to:

 

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effect service of process within the United States against us and our non-U.S. resident directors and officers;

 

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enforce U.S. court judgments based upon the civil liability provisions of the U.S. federal securities laws against us and our non-U.S. resident directors and officers in both the United States and France; and

Alcatel-Lucent is a French société anonyme, established in 1898, originally as a listed company named Compagnie Générale d’Électricité. Our corporate existence will continue until June 30, 2086, which date may be extended by shareholder vote. We are subject to all laws governing business corporations in France, specifically the provisions of the commercial code and the financial and monetary code.

Recent events

2014 dividend. Our Board has determined not to pay a dividend on our ordinary shares and ADSs based on 2014 results. Our Board will present this proposal at our Annual Shareholders’ Meeting on May 26, 2015.

Partnership with Louis Dreyfus Armateurs. On March 18, 2015 we entered into a new partnership agreement with Louis Dreyfus Armateurs (LDA) for our submarine cables activity. Our subsidiary Alcatel-Lucent Submarine Networks acquired 100% of the shares of ALDA Marine, our former joint-venture with LDA. LDA remains our strategic marine partner.

Highlights of transactions during 2014

Disposals

Disposal of cyber-security services. On December 31, 2014, we completed the disposal of our cyber-security services & solutions and communications security activities to Thales for a cash price of €41 million.

Disposal of Alcatel Lucent Enterprise. On September 30, 2014, Alcatel Lucent completed the disposal of 85% of its Enterprise business to China Huaxin, following the binding offer received early February 2014, for a cash price of €205 million.

Disposal of LGS. On March 31, 2014, we completed the disposal of LGS Innovations LLC to a U.S.-based company owned by a Madison Dearborn Partners-led investor group that includes CoVant, for a cash price of U.S.$110 million (€81 million) after working capital adjustment. The agreement includes an earnout of up to U.S.$100 million, based on the divested company’s results of operations for the 2014 fiscal year, but for which we are not expecting to receive a significant amount.

Other matters

Repayment of Senior Secured Credit Facility. On August 19, 2014, using the proceeds of the OCEANE 2019 and 2020 described below, together with cash, we repaid the remaining U.S.$1,724 million outstanding of the Senior Secured Credit Facility due 2019.

 

Repayment of convertible trust preferred securities. On January 13, 2014, we repaid in full the U.S.$931 million principal amount outstanding of the Lucent Technologies Capital Trust I 7.75% convertible trust preferred securities due 2017.

Changes in credit ratings. On November 17, 2014, Moody’s changed the outlook on Alcatel-Lucent and Alcatel-Lucent USA Inc. to Positive from Stable, and affirmed the B3 ratings.

On August 18, 2014, Standard & Poor’s raised its corporate credit ratings on Alcatel-Lucent and Alcatel-Lucent USA Inc. from B- to B. The unsecured bonds issued by the Group were also upgraded, from CCC+/B- to B. The Outlook was changed from Positive to Stable.

FCPA investigations. In December 2010 we entered into final settlement agreements with the SEC and the DOJ regarding violations and alleged violations of the FCPA. We signed a deferred prosecution agreement (“DPA”) with the DOJ, pursuant to which the prosecution would be deferred for a term of three years and seven days, with the possibility of a one-year extension at the sole discretion of the DOJ. The DPA entered into effect on December 27, 2010, the date the DOJ filed the charging document with the court. Among other things, the DPA contained provisions requiring the engagement of a French anticorruption compliance monitor (the “Monitor”) for three years. Similarly, under the agreement with the SEC, we agreed, among other things, to engage a Monitor for three years. In June 2014, following discussions with the Monitor, the DOJ and the SEC, we agreed to a six-month extension of the monitorship until December 31, 2014 to provide the Monitor with additional time to confirm certain improvements to our compliance systems. On December 8, 2014, the Monitor submitted his final report and certified that Alcatel Lucent’s compliance program, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations of anti-corruption laws within Alcatel Lucent as defined in and required by the DPA. Following receipt of the Monitor’s final report, the DOJ filed a motion to dismiss with prejudice the FCPA charges underlying the DPA, which the court granted on February 9, 2015.

Outsourcing agreement with HCL. On July 1, 2014, in connection with the targeted cost savings of The Shift Plan, we entered into a 7-year Master Service Agreement with HCL Technologies Limited regarding the transfer of a part of our R&D department for certain wireless legacy technologies. For further details, please refer to Section 6.5 “Contractual obligations and off-balance sheet contingent commitments”, sub-section “Outsourcing transactions,” and to Note 28 to our consolidated financial statements.

Outsourcing agreement with Accenture. On February 28, 2014, in connection with the targeted cost savings of The Shift Plan, we entered into a 7-year service implementation agreement with Accenture regarding the business transformation of our finance function, including the outsourcing of our accounting function. This agreement supplements two similar service agreements with Accenture regarding human resources and information technology. For further details, please refer to Section 6.5 “Contractual obligations and off-balance sheet contingent commitments,” sub-section “Outsourcing transactions,” and to Note 28 to our consolidated financial statements.

On May 14, 2013, Alcatel-Lucent USA Inc. launched an offer to purchase its 2.875% Series B convertible debentures due in 2025, as required under the terms of the indenture, due to the June 15, 2013 optional redemption date. On June 15, 2013, Alcatel-Lucent USA Inc. repurchased and cancelled a principal amount of U.S.$764 million of such debentures, representing approximately 99.8% of the debentures outstanding.

On June 26, 2013, as a first measure under The Shift Plan toward the objective of reprofiling our debt, we launched an offering of OCEANE. The OCEANE mature on July 1, 2018, bear a 4.25% annual interest rate, and have an initial conversion price of €1.80, equivalent to a conversion premium of approximately 37% over the reference share price of Alcatel-Lucent. The proceeds of this offering, closed on July 3, 2013, were approximately €621 million, with a nominal value of €629 million. We used the proceeds of this offering to repurchase and cancel some of our existing 5.00% OCEANE due 2015. We paid approximately €780 million in total for such repurchases. In December 2013, a portion of the then outstanding 2015 OCEANE was converted into €48 million of Alcatel-Lucent ordinary shares, and we repaid the remaining part of the 2015 OCEANE for €11 million. Following the rights offering described above, due to the anti-dilution provisions of the OCEANE 2018, the exchange ratio, which was one Alcatel-Lucent share with a nominal value of €2.00 for one OCEANE 2018, was adjusted to 1.06 Alcatel-Lucent shares with a nominal value of €0.05 for one OCEANE 2018, effective December 9, 2013. The conversion price remained unchanged at €1.80.

Between July and December, 2013, Alcatel-Lucent USA Inc. issued the following series of bonds: U.S.$500 million Senior Notes due January 1, 2020, with an 8.875% coupon; U.S.$1,000 million Senior Notes due November 15, 2020 with a 6.750% coupon; and U.S.$650 million Senior Notes due July 1, 2017 with a 4.625% coupon. The proceeds of these offerings were used to (i) repay the U.S.$500 million Asset Sale Facility and the remaining outstanding amount of the €300 million Credit Facility which were two of the three Senior Secured Credit Facilities mentioned above; (ii) repay or redeem Alcatel-Lucent USA Inc.’s outstanding Series A and Series B convertible debentures and Lucent Technologies Capital Trust I convertible trust preferred securities; and (iii) prefund the maturity of €274 million principal amount of Alcatel Lucent’s 6.375% Senior Notes due in 2014. The offerings made in the United States were limited to qualified institutional buyers.

Capital decrease. Effective as of June, 2013, Alcatel-Lucent’s capital was reduced to €116,471,561.65 by reducing the nominal value of its shares from €2.00 to €0.05 per share, pursuant to the capital decrease approved at the Extraordinary Shareholders’ Meeting held on May 29, 2013.

Revolving Credit Facility. On December 17, 2013, Alcatel-Lucent closed a €504 million three-year revolving credit facility with a syndicate of 12 international banks. As of the date hereof, this facility remains undrawn.

Strategic partnership with Qualcomm. On September 30, 2013, we entered into a strategic partnership agreement with Qualcomm Incorporated to develop small cells for ultra-broadband wireless access. As a result, Qualcomm may

interest, corresponding to a nominal value of U.S.$116 million. This represented 13% of the total U.S.$881 million nominal value of such debentures outstanding at December 31, 2011.

Repayment of notes issued in 2010. In February 2012, we repaid the notes that we had issued in July 2010 with maturity in February 2011 (then extended to February 2012) and in October 2010 with maturity in February 2012, for an aggregate €50 million in nominal value. In May 2012, we repaid the notes that we had issued in July 2010 with maturity in May 2011 (then extended to May 2012) for an aggregate €50 million in nominal value.

We occupy, as an owner or tenant, a large number of buildings, production sites, laboratories and service sites around the world. There are two distinct types of sites with the following features:

 

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production and assembly sites dedicated to our various businesses;

 

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sites that house research and innovation activities and support functions.

A significant portion of sites are located in Europe, in the United States and in China.

Most of our production and assembly is outsourced, while the remaining portion is carried out in our production sites. At December 31, 2014, our total production capacity was equal to approximately 237,000 sq. meters and the table below shows

The main features of our production sites are as follows:

 

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site of Shanghai Pudong (China): 142,000 sq. meters, of which 23,000 sq. meters is used for the production for Fixed Access and Wireless Access activities, the remainder of the site is used mainly for offices and laboratories;

 

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site of Shanghai Songjiang (China): 22,340 sq. meters used for the manufacturing of products for RFS (Radio Frequency Systems);

The occupation rate of these sites varies between 50 and 100 % (average rate is 79%); the space which is not occupied by Alcatel Lucent is leased to other companies or remains vacant.

On November 17, 2006, the Committee on Foreign Investment in the United States (“CFIUS”) approved our business combination with Lucent. In the final phase of the approval process CFIUS recommended to the President of the United States that he not suspend or prohibit our business combination with Lucent, provided that we execute a National Security Agreement (“NSA”) and Special Security Agreement (“SSA”) with certain U.S. Government agencies within a specified time period. As part of the CFIUS approval process, we entered into a NSA with the Department of Justice, the Department of Homeland Security, the Department of Defense and the Department of Commerce (collectively, the “USG Parties”) effective on November 30, 2006. As of November 20, 2012, the Department of Commerce ceased to be a party to the NSA. The NSA provides for, among other things, certain undertakings with

governs this subsidiary contains provisions with respect to the separation of certain employees, operations and facilities, as well as limitations on control and influence by the parent company and restrictions on the flow of certain information.

Disposal of LGS. On March 31, 2014, Alcatel-Lucent sold LGS to a U.S. - based company. Alcatel-Lucent worked with the U.S. Government to receive the necessary approvals and amend the NSA to allow Alcatel-Lucent to continue to sell products and services to the U.S. Government through LGS. In addition, by virtue of the sale of LGS, Alcatel-Lucent no longer is a party to the referenced SSA or has directors on the LGS board.

2013 Senior secured credit facilities

On January 30, 2013, Alcatel-Lucent USA Inc., as borrower, and Alcatel Lucent and some subsidiaries of the Group, as guarantors, entered into senior secured credit facilities that were syndicated in January 2013 (the “Senior Secured Credit Facilities”) and which comprised:

 

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An asset sale facility with a total nominal value of U.S.$500 million;

Strategic Focus: There are several major trends centered at the intersection of the network and cloud that are changing the course of the information, communications and technology (ICT) industry, and framing our strategic future:

 

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Dramatic uptick in cloud usage which drives larger data centers and the need for IP networking

 

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More ubiquitous mobile broadband at work, home and on the move

 

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Increasing intelligent connectivity for all kinds of objects which is creating the next generation internet - the internet of objects

 

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Growing availability and value in data that is created by the digital world which allows for better customer experience, new business models and commerce, and a wealth of new intelligent services of all kinds.

These trends began several years ago and collectively have created a period of significant growth in the ICT industry. For society, this will result in a shift in how the world will interact, with the network and the cloud serving as key components.

Our operating strategy leverages these trends and depends on our ability to lead future market shifts to IP and cloud networking and ultra-broadband access. In June 2013, we launched The Shift Plan, which is a three-year industrial program that has already significantly repositioned our company from a telecommunications generalist to a specialist, with better-aligned management, a sound financial foundation, a stronger focus on innovation and significant growth prospects. The Shift Plan laid the foundation for the company to address major trends by focusing on IP and Cloud Networking and Ultra-Broadband Access. As such, we have refocused on a few strategic businesses with a tighter and more controlled portfolio while adapting our cost structure to strengthen our competitive positioning.

Our key strengths to achieve success in our market include:

 

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Our rapid expansion into products focused on creating an all-IP network in the cloud. Our cloud IP portfolio centers around: IP routing, Nuage Networks (our SDN platform), IP transport (including WDM) and selected IP Platforms such as Advanced Communications (IMS), Customer Experience Management and CloudBand, our virtualized software platform.

 

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Our leadership position in the design and evolution of ultra broadband telecommunications networks. We will continue to invest in fiber and in LTE including small cells, to pursue this goal.

 

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Maintaining a core strategy and a sustained investment in Research and Development.

We believe that these strengths, coupled with the placement of IP at the center of our strategy will lead us to a successful future