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Ericsson to pay $242m for Korean telecoms stake

Sweden’s Ericsson has struck a deal with Canadian rival Nortel Networks to acquire majority control of a key South Korean joint venture that makes telecommunications equipment.

Ericsson, the world’s largest network equipment provider, has bought 50 per cent plus one share of LG-Nortel for $242m from Nortel in a deal that values the venture at about $500m.

The acquisition will allow Ericsson to strengthen its position in South Korea’s advanced telecoms equipment market, where it has been traditionally weak because it does not produce much equipment based on CDMA wireless technology.

Ericsson said the stake purchase would provide it with a well-established sales channel and strong research and development capability in the country.

“Korea is one of the largest telecom markets with advanced end-user demand of new services. A strengthening of our position through the collaboration with our new partner LG Electronics will enhance our position for future technology shifts such as LTE,” said Hans Vestberg, president of Ericsson.

The venture is a partnership with South Korea’s LG Electronics and provides wireless technology to the country’s leading telecoms companies and handset makers. LG expects Ericsson to provide global experiences and technical expertise to the joint venture.

LG-Nortel was established in 2005 and last year generated annual revenues of $650m with 1,300 employees. LG-Nortel and rival Samsung, the powerful local conglomerate, dominate the supply of equipment to Korea’s leading telecoms operators such as SK Telecom, KT Corp and LG Telecom.

Following the deal, the joint-venture will be renamed LG-Ericsson.

Ericsson said the focus of the joint venture would be to develop and market large-scale telecoms systems such as WCDMA, CDMA and LTE for telecom service providers in South Korea. Ericsson and Seoul agreed last year to co-operate in developing a green system based on 4G technology.

Toronto-based Nortel filed for bankruptcy protection last year after the credit crunch precipitated a dramatic collapse in customer orders. Since then, its management team has been preparing a restructuring plan that would enable the company to emerge from bankruptcy protection either intact or having sold some of its assets.

Last year Ericsson paid $1.13bn for most of the core wireless assets of Nortel. The deal included the Canadian group’s CDMA wireless technology, which is used in North America.

Источник: Financial Times

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