The proposed merger of Alcatel and Lucent Technologies has been generating a great deal of press. There are logical fits to their respective businesses. Both are large players in the wireless and wired infrastructure markets. On the wireless side, Alcatel plays primarily in the GSM family of technologies while Lucent reportedly has over a 40 percent share of the CDMA2000 air interfaces. Alcatel and Lucent also have long histories on the wireline side. Their businesses also complement each other regionally. All this potential synergy makes sense, but is it the whole story? Is there something different now, other than financials that could be fueling this merger? The wireless and wired infrastructure industries are in a period of transition and both aggressive price reductions and improvements in the efficacy of the equipment have subdued the long-term picture for hardware. Fortunately, a new source of revenue has appeared for the major wireless and wired infrastructure equipment vendors: “managed services” have burst onto the scene with a vengeance. Managed services refer to the management and operation of a wireless or wired network by a third party. Managed services also can include third party hosting of media and end-user applications for transmission over the same networks. Service operators are increasingly turning to these third party vendors to run their networks and manage content for them as they themselves focus on more core business areas such as customer retention, advertising and non-technical business operations. The managed services component of the wireless infrastructure business alone is forecast to have double-digit growth over the next five years and is already a multi-billion dollar a year business. All of the major wireless infrastructure equipment vendors have been quietly positioning themselves to participate heavily in the managed services markets. A recent ABI Research market study on the subject has placed Ericsson at the head of the managed services for mobile wireless pack but Alcatel and Lucent are both in the top five. A combined Alcatel and Lucent managed services business would be as large as Ericsson if not slightly larger, and certainly a powerhouse in this growing and important market segment that could hit the double-digit billion dollar level as early as 2012. This could be the ace-in-the-hole that is prompting the companies to take a new look at a possible merger.