Ericsson wins war for Nortel wireless assets

Dylan Bushell-Embling
27 Jul 2009
00:00

Ericsson has won the bidding war to acquire Nortel's wireless business after offering $1.13 billion for its CDMA and LTE assets.

Ericsson beat out bids from Nokia Siemens and investment firm MatlinPatterson to purchase the CDMA business - the world's second largest - and most of Nortel's LTE business. Nortel will keep some of the LTE patents.

If approved by US and Canadian courts - they are due to rule on Tuesday, July 28 - the deal confirms that the Canadian vendor will be broken up. Avaya has offered $475 million for the enterprise business, while the company is still seeking a buyer for its metro division.

As part of the arrangement, around 2,500 employees will be transferred to Ericsson, of which 400 are focused on LTE R&D, Ericsson said.

The deal is expected to have a positive effect on earnings within a year after closing. Ericsson will continue to provide support for existing Nortel customers.

Nortel's CDMA operations generated around $2 billion in revenue in 2008. The acquisition is expected to boost Ericsson's share of the North American wireless market by 30%, and its global share by 5%, Bloombergsaid.

Ericsson CEO Carl-Henric Svanberg said the deal positioned Ericsson as a leading telecoms supplier in North America. The market accounted for just 11% of its sales in the first half of 2009.

Ericsson said its North American business generated $2.7 billion in sales in 2008, mainly from GSM and W-CDMA equipment and services. The acquisition, and the recent Sprint managed services agreement, meant North America would become Ericsson's largest region, with 14,000 employees.

Nortel CEO Mike Zafirovski said the company "remains focused" on finding buyers for its other businesses. "We are determined to maximize value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible," he said.

NSN chief markets operations officer Bosco Novak said the company would continue to focus on its North American business despite the outcome.

"We did not enter this process with a win-at-any-cost mindset," Novak said. "Ours was an opportunistic bid aimed at supporting the great progress we've made in North America in the past 18 months, and we are very confident that momentum will continue to grow."

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