Alcatel invests in a new ICT Early Stage fund to support innovation by SMEs

Paris, October 26, 2006 – Alcatel (Paris: CGEP.PA and NYSE: ALA) today announced its commitment to invest EURO 10 million in I-Source 3, a French Venture Capital fund expected to raise EURO 100 million in the coming months. Other investors include Caisse des Dépôts et Consignation, INRIA, Groupe des Ecoles Télécoms, Macif and GIMV.

The investment approach is focused on telecommunication systems and services but extends to embedded systems, enterprise software and electronics. Investments will be exclusively in new companies at the “seed stage”.

I-Source 3 is managed by I-Source Gestion (ISG), the leading ICT seed-capital firm in France. ISG also manages T-Source, a pure telecommunications fund in which Alcatel invested in 2002. T-Source supported the creation of 11 companies, of which several have signed partnerships and commercial agreements with Alcatel, for instance, in the fields of Wireless communications and Mobile Video services.

This partnership between ISG and Alcatel will also allow the support and development of the participation of innovative SMEs the French competitiveness clusters initiative (“Pôles de Compétitivité”).

“With I-Source 3, we are very glad to renew our Preferred Venture Partnership with Alcatel and extend our cooperation regarding new technology transfers, should it be through spin-offs or licensing of technology developed in Alcatel labs. In cooperation with Alcatel, we are looking to increase the creation and development of high growth companies at the crossroads of ICT R&D, industry, and world class entrepreneurs” said Eric Harlé, I-Source Gestion Managing Partner.

“With this investment, Alcatel wants to reinforce its action to promote innovation in France and Europe, for instance around new usages as mobile TV and innovative applications requiring high speed networks. Contributing to the take-off of local innovative ecosystems gathering together large industrial companies, SMEs and public institutions, is part of our commitment”, adds Olivier Baujard, Alcatel’s Chief Technology Officer.

About I-Source Gestion
I-Source Gestion is the French leading ICT focused, early-stage venture firm. Its investments cover more specifically Embedded software, Corporate software, SaaS, Multimedia, Telecom systems and services. I-Source Gestion is managing 150M€ through 6 funds and has 50 companies in portfolio. For more information: http://www.isourcegestion.fr

About Alcatel
Alcatel provides communications solutions to telecommunication carriers, Internet service providers and enterprises for delivery of voice, data and video applications to their customers or employees. Alcatel brings its leading position in fixed and mobile broadband networks, applications and services, to help its partners and customers build a user-centric broadband world. With sales of EURO 13.1 billion and 58,000 employees in 2005, Alcatel operates in more than 130 countries. For more information, visit Alcatel on the Internet: http://www.alcatel.com

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Régine Coqueran

Corporate Media Relations

Alcatel

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