Alcatel-Lucent (2007) Notes to consolidated financial statements [extract] Note 3 Changes in consolidated companies [extract] On July 1, 2005, Alcatel and Finmeccanica announced the successful creation of two joint ventures that had been described in a memorandum of understanding signed by the parties on June 24, 2004: Alcatel Alenia Space (Alcatel-Lucent received 67% and Finmeccanica 33%) and Telespazio Holding (Finmeccanica received 67% and Alcatel 33%). These joint ventures are consolidated using the proportionate consolidation method starting July 1, 2005. Alcatel analyzed this transaction as a sale to Finmeccanica of 33% of Alcatel Spaces satellite industrial activity and 67% of its service activity and as an acquisition of 67% of Alenia Spazio (the industrial space systems of Finmeccanica) and of 33% of Telespazio (service activities for Finmeccanicas space systems). The values assigned to this transaction were ?ª1,530 million for Alenia Space and ?ª215 million for Telespazio, resulting in a gain to Alcatel on the sale before tax of ?ª129 million in 2005 and in goodwill not yet allocated of ?ª143 million. Alcatel received from Finmeccanica an equalization payment of ?ª109 million. Net cash resulting from the activities acquired and disposed of is ?ª15 million at the transaction date. Due to the existence of price adjustment clauses in the agreement between Alcatel and Finmeccanica, adjustments to the above amounts were made during the third quarter 2006 (see above). Proportionately consolidating the combined space activities of the two partners did not have a significant impact on Alcatels revenues, operating margin and total balance sheet. However, this consolidation method resulted in recognizing a deferred tax charge of ?ª38 million due to the removal from the French tax consolidation of the companies transferred to the joint ventures in the context of the transaction described above.
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