Nortel carve-up begins with CDMA sale

Robert Clark
10 Aug 2009

The great Nortel carve-up has begun. Ericsson paid $1.13 billion to hack off the Canadian firm's North American wireless business, beating out Nokia Siemens and investment firm Maitlin Patterson.

Meanwhile, Avaya has offered $475 million for the enterprise group, and a buyer is still being sought for the metro division. But the wireless selloff is opposed by another Canadian firm, Research In Motion (RIM), whose $1.1 billion bid Nortel disqualified. RIM has campaigned to bring the Canadian government into play, calling on it to review the asset sale.

The BlackBerry-maker has not explained its interest in Nortel except in nationalistic terms. RIM CEO Jim Balsillie said in a statement that the company was "extremely disappointed" that Nortel's technology, which had been part-funded by taxpayers, "seems destined to leave Canada". Almost certainly RIM is attracted by Nortel's LTE intellectual property, much of which the company has retained.

Under the deal struck with Ericsson, the Swedish vendor takes control of the North American CDMA business but will license Nortel's a number of key LTE patents.

The CDMA unit generates $2 billion a year from customers such as Verizon, Sprint, US Cellular, Bell Canada and Leap. Combined with Ericsson's existing business, which yielded $2.7 billion last year, it becomes the company's biggest market. Some 2,500 staff will transfer to Ericsson, including 400 working on LTE. The deal also does not cover Nortel's Asian CDMA base, which Nortel will continue to service. These include China Telecom (with 40 million customers), Indonesia's Bakrie Telecom (8 million) and Taiwan's Asia Pacific Telecom Group.

Ovum senior analyst Nathan Burley said Nortel had extracted a good price from Ericsson, as evidenced by the fact that Nokia Siemens Networks (NSN), which originally had offered just $650 million, had "tapped out". The sale of the remaining Nortel assets continues. Sue Spradley, the head of NSN North America, has said the firm might return to the bidding. The biggest questions remain over the assets not yet on the sale block - the 4G patents and the profitable Asian wireless business.

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