Ericsson will acquire acquire Nortel’s CDMA and LTE assets in North America in a deal valued at US$1.13 billion in cash. Ericsson’s bid prevailed in the auction process initiated by Nortel. The deal is subject to approval by the United States and Canadian Bankruptcy Courts and the satisfaction of regulatory and other conditions.
The agreement includes important CDMA contracts with North American operators such as Verizon, Sprint, U.S. Cellular, Bell Canada and Leap, as well as LTE assets, certain patents and patent licenses relating to CDMA and LTE. Nortel’s customers will also benefit from the continued support of Nortel’s installed CDMA base and the migration path to LTE.
Nortel’s North American CDMA operations generated approximately USD 2.0 b. in 2008, with robust profitability from a good product mix, which includes a significant amount of services. Going forward, research and development costs are expected to be relatively low in CDMA compared with other technologies.
Ericsson’s North American business generated SEK 17.9 (USD 2.7) b. of sales in 2008, mainly from GSM and WCDMA equipment and associated services. When coupled with the recently announced Sprint services agreement, this acquisition makes North America the largest region within Ericsson and encompasses some 14,000 employees.
Ericsson said the acquisition will have a positive effect on its earnings within a year after closing.
Magnus Mandersson, presently head of Ericsson Northern Europe, is appointed President of Ericsson CDMA operations, and Richard Lowe, Nortel, is appointed Chief Operating Officer.
“Acquiring Nortel’s North American CDMA business allows us to serve this important region better as we build relationships for the future migration to LTE. Furthermore, by adding some 2,500 highly skilled employees, of which about 400 are focused on LTE research and development, Ericsson reinforces and expands a long-term commitment to North America. This deal, along with our recently announced Sprint service agreement, truly positions Ericsson as a leading telecoms supplier in North America,” said Carl-Henric Svanberg, President and CEO of Ericsson.
“Nortel remains focused on finding the right buyers for our other businesses while continuing to maintain excellent customer service levels. We are determined to maximize value while preserving innovation platforms, customer relationships and jobs to the greatest extent possible. With today’s agreement and through the anticipated sales of the Company’s other businesses, Nortel will leave its mark on the industry for decades to come,” stated Nortel President and Chief Executive Officer, Mike Zafirovski.
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- Earlier this month, Sprint awarded a seven-year network management outsourcing contract to Ericsson covering its CDMA, iDEN and wireline networks. Sprint said the deal enables it to focus on delivering a superior customer experience, innovative services and popular new devices while letting Ericsson handle the day-to-day operations of its network. The agreement, with an option for renewal, will result in payments for services valued at between $4.5 billion and $5 billion (USD) over the seven-year term of the contract. The transaction calls for about 6,000 Sprint employees to begin performing their network functions as Ericsson employees sometime in the 3rd quarter.
- In June, Nokia Siemens Networks had announced its bid to acquire Nortel’s key wireless assets for $650 million.
