Sun, Jul 26, 2009 - Page 11 News List

Ericsson to acquire Nortel wireless unit for US$1.13 billion


Ericsson AB will acquire the wireless-equipment unit of insolvent Nortel Networks Corp for US$1.13 billion in cash after beating out bids from Nokia Siemens Networks and MatlinPatterson Global Advisers LLC.

The auction process has been completed, Ericsson said yesterday in a statement on its Web site.

Nortel, led by CEO Mike Zafirovski, is selling off businesses after filing for bankruptcy protection six months ago.

The division supplies cellphone systems based on the code-division multiple access (CDMA) standard used by many North American networks.

The unit also includes gear based on long-term evolution (LTE) technology, supported by the two biggest US phone companies, that will power Web-equipped phones.

“It’s going to be an important technology from 2012 onward,” said Neeraj Monga, an analyst at Veritas Investment Research Co in Toronto.

Licensing LTE technology to handset makers may be worth as much as US$2.9 billion in royalties during the next 15 years, based on Nortel’s own predictions, JP Morgan Securities said last month.

The standard’s future significance probably helped attract the variety of bidders, Monga said.

Ericsson president and CEO Carl-Henric Svanberg told analysts in a quarterly earnings conference call that he believes Nortel’s wireless division could give his company a stronghold.

“This about an ongoing CDMA business in North America,” he said.

He said several carriers, including Bell Canada’s wireless division, still use CDMA technology and will need another platform for technological growth, which the Nortel division can provide.

“The assets could certainly improve our strategic position in the US, especially since many CDMA operators will migrate first of all into LTE,” Svanberg said.

Research In Motion Ltd (RIM), maker of the BlackBerry phone, also expressed interest in acquiring the Nortel business. But the company was absent from the negotiations on Friday.

RIM clashed with Nortel over the bidding process and called on the Canadian government to intervene before the bidding began.

Federal Canadian ministers said they encouraged Nortel and RIM to meet and discuss the bid, but refused to intervene.

At least 2,500 Nortel employees will be offered positions with Ericsson, Nortel said in a separate e-mailed statement yesterday.

US and Canadian court approvals will be sought at a joint hearing on Tuesday and the companies will seek to complete the transaction later this year, it said.

Nortel plans a similar auction for its corporate-networking business this quarter. The company agreed to sell the division to Avaya Inc for US$475 million, pending higher bids.

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