A proposed merger of Alcatel and Lucent could create a communications convergence powerhouse with a combined turnover of $25 billion a year, possibly prompting further consolidation in the telecommunications sector.

Although promoted as a “potential merger of equals,” the French Alcatel is the larger of the two companies and there could be many obstacles to concluding a deal. A previous attempt to combine the companies broke down in 2001 amid disagreements over the board structure.

A merger would combine the research and development expertise of Lucent, with its roots in AT&T Bell Labs, with the leadership of Alcatel in DSL broadband access equipment and in IPTV services, which it markets through a partnership with Microsoft.

A combined company could have global reach, strengthening Alcatel in the United States, while giving Lucent access to European markets and helping stave off growing competition from Chinese companies like Huawei. A merged entity would have a similar turnover to Cisco or Ericsson, but still significantly less than Motorola or Nokia.

Analysts suggest that it could lead to an increase in mergers and acquisitions in the telecommunications sector, as carriers consolidate and invest in next-generation networks.