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Ericsson to buy Nortel GSM network assets

Swedish network equipment vendor L.M. Ericsson Telephone Co. said it will buy Nortel Networks Corp.'s GSM business in the U.S. and Canada for $70 million on a cash and debt free basis, having bought the bulk of its second-generation mobile networks as well as newer network technology earlier this year.

The transaction, which has helped make North America Ericsson's biggest market, is expected to have a positive effect on the company's earnings within a year after closing, although analysts said the impact will be relatively small.

GSM, or Global System for Mobile Communications, is the dominant second-generation mobile phone standard in the world, but Code Division Multiple Access (CDMA), a rivalling second-generation technology, is still equally important in North America.

Ericsson last week said it had completed the acquisition of Nortel's CDMA assets, as well as its LTE, or Long Term Evolution, assets in North America. It said in June it would buy the assets for $1.13 billion. LTE is the latest mobile network technology, allowing faster wireless download and data transfer speeds.

Parts of Nortel's assets have been sold in a number of auctions after the Toronto-based company filed for bankruptcy protection in January this year.

Ericsson bid for the GSM assets with Austrian company Kapsch CarrierCom AG, which will pay $33 million for most of the remaining GSM assets outside North America.

European and Asian telecom equipment makers have been pushing into North America, the world's largest market in recent years, as companies like Nortel have contracted.

Huawei told Dow Jones Newswires in a recent interview it aims to add 600 new employees in North America next year to support a rise in customer business.

However, not all companies have been successful. Nokia Siemens Networks, a joint venture between Nokia Corp. and Siemens AG, said Monday it had lost an auction for Nortel's optical networking and carrier Ethernet assets to U.S.-based rival Ciena Corp.

Ericsson said the acquisition of the Nortel assets, and a recent service deal with U.S.-based mobile operator Sprint, has made North America Ericsson's largest geographical unit with 14,500 employees, up from 5,000 at the start of 2009.

"Along with our recent acquisition of Nortel's CDMA and LTE assets, the transaction emphasizes Ericsson's commitment to the North American market," said Ericsson's incoming Chief Executive Officer Hans Vestberg.

Ericsson said Wednesday's agreement includes the transfer of important GSM business with North American operators including AT&T and Deutsche Telekom AG's T-Mobile, adding that it will take over around 350 Nortel employees.

Nortel's North American GSM operations generated around $400 million in 2008.

Analyst Martin Nilsson at Handelsbanken said the deal may help Ericsson maintain equipment for some of Nortel's North American customers, but is too small to have any significant strategic importance.

Nortel's North American GSM business has probably declined from 2008 and might generate some $200 million to $300 million in the current year, he said.

SEB Enskilda is acting as Ericsson's financial advisor in the transaction.

At 0857 GMT, shares in Ericsson were up 0.9% at SEK69.90, against a 0.4% rise in the wider Stockholm market.

Источник: Total Telecom

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