SHANGHAI TELECOM SELECTS ALCATEL-LUCENT FOR IP/MPLS.

Alcatel-Lucent (Euronext Paris and NYSE: ALU) has announced that Shanghai Telecom, a subsidiary of China Telecom, has selected Alcatel-Lucent's IP/MPLS solution for its metro area network expansion and network optimization in the city of Shanghai. Once complete, subscribers of Shanghai Telecom will be able to enjoy a broad suite of premium IP-based services with higher quality and greater flexibility. This contract was won through Alcatel Shanghai Bell, Alcatel- Lucent's flagship Chinese company.

Shanghai Telecom has approximately nine million subscribers creating a huge demand for advanced data services. To meet these requirements and anticipate future growth, Alcatel-Lucent will provide Shanghai Telecom with a state-of-art IP/MPLS solution including its 7750 Service Router and 7450 Ethernet Service Switch.

Once deployed in mid-2007, Shanghai Telecom will be able to offer IP-based services with the Quality of Service required to meet service level agreements for Layer 2 Virtual Private LAN Service as well as Layer 3 IP VPN services, and next-generation network services in the future.

"Market demand for advanced data services in Shanghai is increasing at an extremely fast pace," said Zhang Weihua, Chairman of Shanghai Telecom's board. "IP/MPLS is the strategic direction for network transformation and will help us meet the high expectations of our customers. We believe Alcatel-Lucent's premium IP/MPLS solutions and experience in network transformation will give us a significant advantage as we move to the next phase of our network infrastructure."

"Alcatel-Lucent's IP solution is gaining tremendous attention from operators across China," said Frederic Rose, president of Alcatel-Lucent's Asia Pacific activities. "This contract further demonstrates Shanghai Telecom's confidence in our advanced IP/MPLS solutions as we provide the flexible and service-rich foundation necessary to expand its offerings in line with business and subscriber requirements."

Today, major Chinese operators including China Netcom, China Telecom, China Unicom, and China Mobile have selected Alcatel-Lucent's IP suite of solutions to optimize their networks delivering high-performance, carrier- grade data, voice and video services to their customers. Alcatel-Lucent's IP/MPLS solutions are now serving in the production networks of 33 out of 34 Chinese provinces, regions and municipalities. Shanghai Telecom also joins more than 160 service providers in over 60 countries who have selected the Alcatel-Lucent IP portfolio. According to Ovum-RHK, Alcatel-Lucent was #2 in the IP/MPLS Edge market segment in Q4 2006, with 19% market share.

About Alcatel Shanghai Bell

Alcatel Shanghai Bell is a central enterprise directly managed by State Asset Supervision and Administration Commission (SASAC), and the first foreign-invested company limited by shares in telecommunications industry in China, with extensive global resources. The multi-billion dollar telecom technology leader delivers end-to-end telecommunications solutions and high- quality services, covering the fixed, mobile networking, broadband access, intelligent optical networking, multimedia solutions and network applications. It also has a key international R&D centre with full access to Alcatel- Lucent's global technology pool, developing original technology for use in China and export to Alcatel-Lucent's customers worldwide. Its production and manufacturing centre has advanced techniques and equipments. Its most extensive sales and support networks cover China nationwide and more than 50 countries overseas. It is the only company capable of meeting the global needs of Chinese customers. For more information, visit Alcatel Shanghai Bell on the Internet at http://www.alcatel-sbell.com.cn.

About Alcatel-Lucent

Alcatel-Lucent (Euronext Paris and NYSE: ALU) provides solutions that enable service providers, enterprises and governments worldwide, to deliver voice, data and video communication services to end-users. As a leader in fixed, mobile and converged broadband networking, IP technologies, applications, and services, Alcatel-Lucent offers the end-to-end solutions that enable compelling communications services for people at home, at work and on the move. With operations in more than 130 countries, Alcatel-Lucent is a local partner with global reach. The company has the most experienced global services team in the industry, and one of the largest research, technology and innovation organizations in the telecommunications industry. Alcatel-Lucent achieved adjusted proforma revenues of Euro 18.3 billion in 2006 and is incorporated in France, with executive offices located in Paris. [All figures exclude impact of activities transferred to Thales].

For more information, visit http://www.alcatel-lucent.com.