Dealers said the market was sceptical about the commercial sense of the deal, taking the view that it was expensive for Alcatel and wrongly timed.
"For a company with a credit rating that's not very good anyway to pay a 20 percent premium for a company that spends money like there's no tomorrow is not going to be very rewarding for the market," said Edinburgh Fund Managers' Gillespie.
Alcatel fell 7.2 percent and its bond yields also widened by around 10 basis points on worries that a combination with Lucent could lead to a credit rating downgrade.
In the debt default market, the cost of credit protection on the Alcatel debt rose sharply. The five year default swap for Alcatel widened from a bid/offer of 73/78 basis points on Thursday to 100/110 basis points on Friday, as traders baulked at the reported amount it would cost Alcatel to buy Lucent.
The default swap traded at 100 and 102 basis points on Friday.
Default swaps are insurance-like tools that enable investors to juggle the risk of an issuer defaulting on an underlying loan or bond.
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