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* Michel Combes to become CEO on April 1
* Previously head of Vodafone Europe, CFO France Tel
* Canada's Jean Monty named vice-chairman of board
* Alcatel unable to deliver profit, cash since 2006 merger
* Shares up 2.9 percent
By Leila Abboud
PARIS, Feb 22 (Reuters) - Loss-making telecom equipmentmaker Alcatel-Lucent has picked Michel Combes, theFrenchman who steered Vodafone's European businessthrough the financial crisis, as its new chief executive.
Combes, 51 and a former finance chief at France Telecom, will replace Ben Verwaayen, who led Alcatel-Lucent forfive years but failed to deliver a long-promised turnaround.
The Franco-American group, which plunged to a net loss of1.37 billion euros ($1.8 billion) in 2012, has been hit hard bythe rise of low-cost Chinese competitors in the past decade andtrails market leaders Sweden's Ericsson and China'sHuawei in size and market share in mobile equipment.
Combes, who will take over on April 1, had been picked lastyear to head Vivendi's SFR, France's second-biggestmobile operator and another business in need of a revamp. Butthat appointment was aborted after a management shake-up at theparent company.
At Vodafone from 2008 to 2012, Combes had to cut costs andmarket innovatively to cope with a slump in consumer spending insouthern European markets such as Spain and Italy.
"Combes is a good choice since he has a 20 year track recordin telecoms, and knows the French political establishment well,"said one industry analyst.
"He has experience managing difficult situation like therecession that hit southern Europe when he was at Vodafone. Butthe challenges at Alcatel are of a different magnitude:everything easy has already been tried and nothing has worked."
At 0852 GMT, Alcatel-Lucent shares were up 2.5 percent at1.168 euros, outperforming a 1.1 percent rise in France'sbenchmark stock index.
THE TASK AHEAD
Since it was formed in a merger in 2006, Alcatel-Lucent hasgone through two chief executives and not been able to reachsustainable profitability or cash flows despite cost-cutting andparing its product portfolio.
The group has strong technology in fixed broadband, opticaltransmission gear in the backbone of networks, and fourthgeneration (4G) mobile, but has suffered from the costs ofmaintaining a broad product portfolio.
The U.S. market, which is closed to Chinese competitors andwhere operators have invested heavily in 4G, has saved it inrecent years as it lost share in Europe and Asia.
The challenges facing Combes, who will be Alcatel-Lucent'sfirst French chief executive since its 2006 formation, will beto continue cutting costs and making the company smaller, whilenot falling behind rivals in research and development.
He'll also have to contend with the political fallout ofrestructuring in France, where the Socialist government hasexpressed concern but taken little action about the group.
Here, his experience at partly state-owned France Telecomcould help. At the former monopoly, he oversaw restructuring anddeep cost cutting alongside then CEO Thierry Breton.
Alcatel-Lucent also named Jean C. Monty as vice-chairman ofthe board, effective immediately. Monty, 64, is a formerchairman and chief executive of Bell Canada Enterprises.
Philippe Camus, Alcatel-Lucent's current chairman, willlikely stay on since he has requested another three-yearmandate, said a spokesman for the company. The mandate must beapproved at the next shareholders' meeting on May 7.
Alcatel-Lucent is in the middle of a 1.25 billion eurocost-cutting plan that will result in some 5,500 layoffs andexiting of unprofitable contracts and countries.
In January it finalised a financing package of 2 billioneuros, and put up its portfolio of 29,000 patents as collateralto assuage lenders concerned about its viability.
