A worker of Alcatel-Lucent, the French telecommunications equipment company, processes a telecommunications equipment at its Shanghai plant. Provided to China Daily

Alcatel-Lucent, the French telecommunications equipment company, said its three-year restructuring plan, which began in 2013 to reposition the company as a specialist in IP networking and ultra-broadband access, is bearing fruit.

Federico Guilln, Alcatel-Lucent's president of the fixed networks division, told China Daily that the restructuring has helped widen the company's profit margin, leaving behind the tough times after the company's merger with Lucent Technologies of the United States in 2006.

Alcatel-Lucent's gross profit margin widened to 34 percent in the third quarter of 2014 - a seven-year high from 31.9 percent a year before. It posted an adjusted operating income of 170 million euros ($213 million), beating analysts' expectations of around 138 million euros.

The performance showed that the company's restructuring plan, codenamed "Shift", is working, Guilln said. In the first phase, the "Shift" plan calls for the focusing of the company's business on the growth areas. In the process, assets that don't fit were sold off and costs were trimmed to achieve greater profitability.

In the third quarter of 2014, Alcatel-Lucent cut another 73 million euros in fixed costs, producing total savings of 645 million euros - about 60 percent of the estimated amount needed to return the business to positive cash flow in 2015.

Meanwhile, the company plans to allocate up to 85 percent of its research-and-development budget for the IP networking and ultra-broadband business by the end of next year, compared with 65 percent in 2013.

Alcatel-Lucent has said it has secured major contracts for the supply of IP routing equipment to China Telecom, China Unicom and China Mobile. Its IP routing business recorded a 2.2-percent, year-over-year revenue increase in the third quarter.

The company is also exploring new growth potentials in other areas in the Asia-Pacific region. "The digital agenda of broadband coverage of the ASEAN (Association of Southeast Asian Nations) member states by the year 2020 has triggered the large investment in ultra-broadband network. On mainland, the 12th Five-Year Plan calls for new investments, totaling $365 billion, in broadband infrastructure," said Guilln.

Hong Kong is shaping up as an important market for the company. "We are helping a Hong Kong broadband network company to build one of the fastest broadband services in Asia," said Sang Xulei, Asia-Pacific vice-president of the fixed networks business line at Alcatel-Lucent.

Alcatel-Lucent saw its combined sales in the region surge by 23 percent in the third quarter of this year.

Looking ahead, the company will increase its focus on transformation, innovation and growth. To boost sales, it will look for new partners outside the traditional carriers it has worked with in the past, including banks, television cable companies and Internet firms, Guilln said. "We're diversifying our customer portfolio and entering new areas that we didn't touch before," he said.

felix@chinadailyhk.com

(HK Edition 11/22/2014 page7)