Alcatel-Lucent CEO Says European Regulations Constrain Innovation

This being the end of the year, and with everyone voice their views on what the year ahead looks like, it is always good to see the CEO’s of major industry companies making the media rounds and in the process making news. Alcatel-Lucent (News - Alert) CEO Ben Verwaayen, no stranger to making news with his straight-forward approach to answering media inquiries, certainly gave the telecom community something to buzz about as we start the New Year with comments he made on CNBC.

The link provided will give readers access to the entire interview with the Alcatel-Lucent (ALU) boss, but to give you an inkling of why his remarks are being seen as provocative, the best way to characterize them is in his observation that regulation is holding back innovation in the European telecommunication industry, while the U.S. is advancing rapidly.Below are some of his most thought-provoking/discussion igniting remarks:

"It's not just a French problem it's a European problem. If you look to why it is that the U.S. is so much [more] ahead than Europe it's because of the business environment and what you're allowed to do because this is a regulated business. The situation in Europe is very unfortunate"

He went on to say that because of European regulator focus on saving consumers money instead of also focusing on what regulators in the U.S. have done which is also strike a balance that encourages innovation and investment (risk taking might be an even better term): 

“You don't have the incentive to take risks and take the investments [in Europe]"

Obviously, as a European-based multi-national is concerned that the area of the world he has called home for most of his life, and his professional career, is not just falling behind, but is exhibiting behaviors and mind-sets that will have long-term consequences.   He noted:

"The realities are that if you have to invest as an operator your investment incentives in the U.S. and Latin America are very different -- that is not blame, that is a fact. If the objective is only low prices for consumers, but then don't expect that we'll be at the forefront [of innovation], don't expect that a lot of activities will start here in Europe…"I'm afraid Europe is ultra-conservative and ultra-defensive. With employment we try to protect what's here instead of creating [it]."

The interview also touched on the company’s continued attempts to right-size itself to align its product line and workforce with the growth opportunities it is committed to optimizing. In this regard the CEO said he was “determined to execute” the company’s previously announced restructuring plan that angered the French government along with the company’s French labor unions. He also recommended that there could be hope for Europe if there were a more enlightened attitude toward things like cross-border mergers to consolidate the industry, incentive for entrepreneurs and risk-taking smaller companies, and that the regulators became advocates of greater competition across the continent. In fact, as he noted on CNBC, "We need to bring competition to where it really matters and that's in choice and at the moment the regulator decides my choice and I don't think that's great," he said.

The comments are an interesting juxtaposition of the vote of confidence ALU was given by Credit Suisse AG and Goldman Sachs Bank USA just a few weeks ago when commitments of $2.12 billion were announced to help shore up the company’s financial situation. At that time, along with getting validation for the restructuring and an assertion of faith in the value of the company’s underlying assets, the strategic direction was also validated. One would have thought that given all of this, and the fact that the situation in Europe is not a sudden development and clearly was part of the evaluation done by the investors, that Verwaayen would have turned the discussion in that direction. 

However, as an observer of both ALU and its CEO for many years, it actually was not that surprising that the conversation focused on getting rid of obstacles. Verwaayen, is obsessed with seeing the innovation process being given it chance to fully maximize its potential everywhere in the world. Hence, his desire to get Europe onboard may have been a bit of cold water during this cheerful time of the year, but you have to admire his using the opportunity to get the attention of European regulators. Hopefully, they are listening.

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