ALCATEL AND STMICRO SIGN AGREEMENT FOR DEVELOPMENT AND SUPPLY OF FUTURE GSM/GPRS CHIPSETS.

STMicroelectronics (NYSE:STM) and Alcatel (Paris: CGEP.PA and NYSE:ALA) have entered into a new cooperation agreement for the development of future GSM/GPRS chipsets for mobile phones and other wireless connectivity applications.

Under the terms of the agreement Alcatel is transferring

to ST its team of mobile phone integrated circuit designers. ST will get access to the know-how and intellectual property developed by this group and related to GSM/GPRS. The resulting chipsets will be available for the open market. This co-operation also includes a multi-year supply agreement associated with 2.5G chipsets.

This co-operation between ST and Alcatel in the development of GSM/GPRS chipsets will result in cost-optimized solutions for the basic 'engine' of the mobile phone, allowing Alcatel to concentrate more on elements which now differentiate mobile phones - software, product integration, user interface design and styling. This cost optimization and the availability for the open market favor the use of GSM/GPRS chipsets for embedded wireless communications in other applications, such as PDAs, automotive systems and laptop computers.

"We have a very high respect for the know-how accumulated by this team of engineers over many years," commented Aldo Romano, General Manager of ST's Telecommunications and Peripherals/Automotive Groups. "Their expertise reinforces very well the present activity performed by ST. With this move ST demonstrates its determination and sustained investment in the field of wireless communication."

The design team transferred from Alcatel to ST has a field-proven experience in analog and digital baseband as well as in digital signal processing and radio frequency design for GSM and GPRS applications.

"In the rapidly evolving mobile phone market, we shall see on the one hand chip set suppliers developing the GSM/GPRS engine and on the other hand, handset manufacturers like Alcatel focusing their efforts on the integration of technologies aimed at improving the value for the consumer with advanced services, user-friendly man-machine interface and attractive styling," said Jacques Combet, Director of Alcatel Mobile Phones activities.

ST and Alcatel have been partners for many years, jointly developing a large variety of integrated circuits for communications applications. This partnership has proved very effective in other communication systems, where the combination of system know-how from Alcatel and system-on-chip know-how from ST has resulted in a range of competitive chipset solutions.

New digital baseband chips to be developed by the Alcatel/ST design team will be based on ST's advanced ST100 DSP core, chosen by Alcatel in 2000 as their preferred core for communications applications. The additional power of the ST100 will allow enhancements to chipset performance and the implementation of new features.

General Packet Radio Service (GPRS) is a new standard that allows the transmission of data over GSM telephone networks at a higher speed and with the convenience of immediate communication without waiting for dialup connections. GPRS is expected to bring new vitality to the market for wireless data communication by enabling mobile Internet services that are fast and user friendly.