The transaction, which will see Alcatel shareholders have the lion's share of the new company, stands to create a world leader in its sector and comes amid a wave of consolidation in the telecoms industry.
The transatlantic deal had been partly complicated by Alcatel's plans to increase its stake in French defense electronics group Thales--a politically sensitive issue that has involved the German and French governments.
Alcatel said it would continue talks with Thales over possibly increasing its shareholding in the group. Alcatel now has a stake of around 9.5 percent in Thales, while the French government holds around 30 percent of Thales.
Alcatel and Lucent said the deal was a "merger of equals."
However, Alcatel shareholders will own around 60 percent of the new company, with Lucent shareholders owning the remaining 40 percent.
As part of the deal, Lucent shareholders will receive 0.1952 of an ADS (American Depositary Share) representing ordinary shares of Alcatel for every common share of Lucent that they currently hold.
Alcatel's Serge Tchuruk will be nonexecutive chairman of the new Paris-headquartered company, while Lucent's Patricia Russo will be chief executive.