Regulators start investigation on Thales' purchase of Alcatel unit

The EU opened an in-depth probe into Thales' plans to buy Alcatel's satellite and security operations, saying the combined company could increase costs and push out rivals who make telecoms satellites, an Associated Press report said.

'Space is a key sector for the European high-tech industry,' said EU Competition Commissioner Neelie Kroes was quoted by the Associated Press report as saying, adding that 'the impact of this major restructuring needs to be carefully assessed to ensure that competition is preserved.'

The European Commission said it must decide whether to block or clear the deal by an April 17 deadline. It can, and often does, demand that companies under investigation sell off units or make binding promises to change the way it does business.

Thales, a French electronics and defense company, has offered cash and shares to acquire Alcatel's shares in two satellite companies, Alcatel Alenia Space (AAS) and Telespazio, currently jointly controlled by Alcatel and Italy's Finmeccanica, the report said.

The deal keeps sensitive technology in French hands, aiming to smooth French government concerns as Alcatel focuses on its core telecom business and gears up to integrate the $13.4 billion purchase of Lucent, the report added.

EU regulators said they were worried about the power Thales and AAS would have because Thales was the dominant supplier for traveling wave tubes _ a key component for telecoms satellites that amplify microwave signals before they are transferred to Earth. It has only one rival in that sector, the report further said.