Template Tools
Report: Unpaid Leave at Alcatel-Shanghai Bell
Thursday, 14 February 2013 17:00

ASB_eventsAlcatel “continued low activity in China.” Chinese publication OFWeek reports that ASB employees returning from the Spring Festival will be required to take between 2 and 5 days of “unpaid leave” each month for the next six months. This is unconfirmed, with an Alcatel spokesman telling me they had no news like this to report. With the Chinese holiday, they couldn’t check further.

Cutbacks at Shanghai Bell are consistent with this comment from Alcatel last week:

From a geographic standpoint, also adjusted for constant currency and compared to the year ago period, North America posted a 10% growth rate. Mixed trends in Asia Pacific resulted in a low double-digit decline, traction in Japan being offset by continued low activity in China. Cautious spending persisted in Europe, which also declined at a low double-digit rate. Rest of world was resilient, driven by continuous traction in Brazil and by Middle East and Africa, which returned back to growth after several quarters of decline.

ASB is majority owned by Alcatel but with a major stake held by local government. It traditionally competes effectively with Huawei and ZTE for Chinese contracts. The big Chinese telcos have been holding capex flat as landlines decline. They continue to demand, and receive, the best prices in the world for their equipment. Fiber home gear in China goes for less than $100/home. Margins in China are so limited that ZTE reported a major loss.

   ASB makes much of the gear Alcatel sells worldwide and sources from China many other items that ship with an Alcatel label. They do a very large share of the Alcatel engineering. AT&T U-Verse staffers were surprised how much of their support was coming from engineers in Chengdu. Alcatel has shifted so much to China they can no longer claim that Huawei is beating them because of lower Chinese labor costs.

   There’s no public disclosure I can find of ASB’s finances. While top management is French, it operates very independently. A Communist party official plays a major role in management. The profitability of ASB is heavily determined by the transfer pricing to Alcatel Paris. The relation of Paris to China has long been difficult to research; apparently Paris doesn’t want investors to look into the finances.

Sources: The “unpaid leave” story comes from http://fiber.ofweek.com/2013-02/ART-210007-8120-28666967.html , who in turn credits Sina Tech but I couldn’t find the original. (Google Translate keeps getting better but it’s still a little awkward to read the Chinese press.) I generally would not pick up a story like this with confirmation, but OFWeek has enough details it feels like more than a rumor.

Last Updated on Thursday, 14 February 2013 17:20