Alcatel-Lucent has warned of uncertainties in its home European market this year following a slump in first-quarter sales and weaker margins, sending shares of the network equipment maker down almost a fifth.

Alcatel provides equipment and services to global telecoms operators, which are cutting spending in the face of declining revenues. They are also demanding better prices for upgrading networks given increased competition from Alcatel’s Asian rivals such as Huawei Technologies and ZTE.

This fed through to lower profitability for Alcatel, which said yesterday its gross margin fell to 30.3 per cent in the three months to March, from 35.3 per cent last year. Analysts questioned its full-year target and the shares tumbled 14 per cent to €1.27.