Sweden’s LM Ericsson has won the bidding war over the wireless assets of Nortel Networks, agreeing to pay US$1.13 billion for the financially beleaguered Canadian company’s CDMA business and LTE Access technology.
The deal, subject to court approval in the U.S. and Canada, will greatly expand Ericsson’s foothold in North America, bringing customer relationships with large operators such as Verizon and Sprint.
Nortel had been operating under court bankruptcy protection since January. In June, the company accepted a $650 million offer from Nokia Siemens Networks for its CDMA and LTE assets. That offer set the stage for Private equity firm MatlinPatterson to jump in with a counter offer of $725 million for the wireless assets.
Research in Motion also made an offer for the assets but was barred from the sale after a bidding procedure dispute with Nortel.
Ericsson was a late entrant to the bidding process, with its interest publicly declared just Thursday. As part of deal, announced early Saturday, Ericsson will offer employment to a minimum of 2,500 Nortel employees supporting the CDMA and LTE Access business.
“This is one of those gifts from heaven for Ericsson in the otherwise very competitive world these companies operate in. Rather than competing with Nortel, Ericsson has won,” said telecom industry analyst Jeff Kagan in e-mail. The consolidation of the industry, however, is not necessarily a good thing for customers, he noted.
“There are other competitors today, however Nortel posed a large competitive threat to Ericsson, and without that dynamic, what will the affect be on pricing and innovation and customer responsiveness?”
Ericsson and Nortel officials sought to reassure customers.
“The anticipated sale of our CDMA business and LTE Access assets to Ericsson for $1.13 billion represents a very positive prospect for our customers who will be able to continue their relationships with a long term partner; for employees who will have new opportunities at Ericsson and for many of our other stakeholders,” said Nortel President and Chief Executive Officer Mike Zafirovski, in a statement announcing the deal.
Ericcson CEO Carl-Henric Svanberg added, “Ericsson is committed to meeting the needs of our new CDMA customers today and bringing the next generation of mobile broadband to the world with LTE.”
Nortel said it will seek Canadian and U.S. court approvals of the proposed sale agreement at a joint hearing on Tuesday, and that it expects to close the deal by the end of the year.