Alcatel Creates a New Internet Division to Focus On Carrier IP Market.

PARIS--(BUSINESS WIRE)--March 4, 1999--

Assured Access to Join New Division as Alcatel Embraces the

Start-up Spirit

To respond to the explosion of Internet demand, a new division has been created within Alcatel, providing Internet solutions for carriers and service providers.

This new division consists of strong business units, either already existing within Alcatel, or wholly owned companies, including Assured Access and Packet Engines. It offers a complete access and edge data solution allowing carriers to connect residential and business customers.

New Division is Part of Alcatel's Strategic Approach to the Market

The creation of the Internet Division reflects Alcatel's vision of the evolution of the market in three broad segments: new carriers, existing operators and enterprise. The new division will address in particular new "greenfield" operators segment, such as internet service providers (ISP's), competitive local exchange carriers (CLEC's) or the newly created data operations of existing operators. The Internet Division will also be a center of expertise for IP technology for other parts of Alcatel networking activities.

Alcatel will shortly announce its vision for those established operators requiring an evolutionary transition to voice/data integration with combined narrowband/ATM/IP technologies.

For the enterprise market, a major initiative has been made with the recently announced acquisition of Xylan, allowing Alcatel to offer customers leading converged corporate communications solutions.

"Alcatel is committed to be a customer focused organization and our emphasis on these three broad markets is a reflection of this strategy," said Serge Tchuruk, Chairman and CEO of Alcatel. "The new Internet Division is a key part of our drive to meet the demands of our customers in the fast growing Internet market which offers Alcatel great opportunities. We are determined to take the initiative and to be a world leader in this segment, by offering our customers the most comprehensive product line and best technology."

Wide Range of Internet Technologies Now Available From Alcatel

With the new Internet Division a range of integrated Internet technologies is now available to Alcatel customers. High speed Internet access is available through Alcatel's ADSL and HFC solutions. The company is the worldwide leader in ADSL with over 35% market share worldwide and 52% in the U.S.

Remote access node technology for dial is available through the newly acquired Assured Access company, which also integrates voice over IP (VoIP) gateway functions.

The Xylan acquisition, with its edge and aggregation routers, will provide seamless transitions solutions for points of presence (POP's).

Packet Engines brings wire speed gigabit routers, providing high performance IP switching, with its WAN and MAN technology applicable as a core routing device.

Alcatel network and service management products will provide customers additional service features such as billing and service level agreements, as well as convergence with the traditional telephone network and services through signaling gateways and a powerful IN platform.

Start-up Style Management With International Reach

The Internet Division will have a common sales, marketing and customer service team with strong regional focus to ensure that well integrated end-to-end solutions are offered to carriers and service providers around the world.

With a worldwide presence of over 850 dedicated IP data experts and a global customer base, the Internet Division will retain the spirit of an Internet start-up, while at the same time benefiting from Alcatel's international presence to accelerate its development.

It will be organized by business units, each having a strong focus on their market requirements and products. While retaining its autonomy, each business unit will participate in the overall strategy and the formulation of end to end solutions.

Business Units will grant long term incentive plans to eligible employees, to be paid in Alcatel shares. These plans will largely depend on their own performance but also on the performance of the Internet Division as a whole.

"The Internet has been driven by rapid innovation, an entrepreneurial spirit and the rapid growth of start-up companies," said Martin de Prycker, president of the new division. "In this new organization we will capture this spirit, whilst also leveraging Alcatel's position as a global leader in communications, to ensure rapid development and deployment of truly world class Internet products and services."

The Internet Division is part of the Internet and Optics group (formerly Transport & access), together with terrestrial and submarine transmission and satellites. Martin de Prycker, formerly director of network strategy, has been appointed president of the Internet Division, reporting to Krish Prabhu, senior executive vice-president of Alcatel Telecom.

Biography: Martin De Pryker, President Internet Division, Alcatel

Martin de Prycker, 43, joined Alcatel in 1982 after obtaining degrees in electrical engineering, computer science and business management. He held various responsibilities within the Group's Research Division. In 1984, he was appointed Research Director of Alcatel in Antwerp. In 1996, he became vice president of the Access Division, responsible for Internet and ADSL. At the end of 1998 he was appointed Network Strategy Director for Alcatel Telecom.

A world leader in telecommunications systems and equipment, as well as related cables and components activities, Alcatel operates in over 130 countries. Alcatel provides complete solutions and services to operators, service providers, enterprises and consumers, ranging from backbone networks to user terminals. For further information on Alcatel, please visit Alcatel on Internet.