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Nortel selling wireless unit to Nokia Siemens

Nortel selling wireless unit to Nokia Siemens
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First Published: Sat, Jun 20 2009. 11 56 AM IST
Updated: Sat, Jun 20 2009. 11 56 AM IST
Los Angeles: Telecom equipment maker Nortel Networks said on Friday that it will sell its advanced wireless technology business to Nokia Siemens Networks for $650 million and that it was making progress in talks to sell its other businesses.
Nortel, once the largest North American maker of telecommunications gear, collapsed into bankruptcy in January, blaming the economic crisis for derailing a turnaround effort that began in 2005.
Nokia Siemens, a joint venture of Nokia and Siemens, had made an unsolicited offer for parts of Nortel’s carrier network group, but the price and scope of a deal had been unclear.
The telecom equipment industry is consolidating and leaving only a few global players — market leader Ericsson, Huawei, Nokia Siemens and Alcatel-Lucent.
The deal will allow Nokia Siemens to expand its presence in North America and make it a leading supplier of wireless infrastructure products in the region, it said in a separate statement announcing the deal.
The transaction includes Nortel’s CDMA business and LTE assets. CDMA is the technology that lost the battle for global dominance but still has a strong position in some markets, including North America. Nortel has a roughly 30% share of the global CDMA market.
LTE is a new high-speed wireless technology that is intended to replace current mobile networks. LTE networks are slated to be deployed in the coming years by large wireless carriers including Vodafone Group Plc and Verizon Communications Inc.
“This agreement provides an important strategic opportunity for Nokia Siemens Networks to strengthen its position in two key areas, North America and LTE, at a price that makes good economic sense,” NSN Chief Executive Simon Beresford-Wylie said in the statement.
Nokia Siemens is now the “stalking horse” bidder, which means its offer sets a floor under other possible offers in the bankruptcy process.
Under the terms of the deal, at least 2,500 Nortel employees in Canada, the United States, Mexico and China have the opportunity to keep their jobs under NSN ownership.
A Nortel spokesman said this represented “a majority” of the employees associated with the assets, but would not give a specific percentage. Nortel once employed more than 90,000 people, but now has about 30,000 staff.
Nortel also said it was advancing discussions to sell its other businesses.
“This is not what we were planning to accomplish,” said Chief Executive Mike Zafirovski in an interview with the Wall Street Journal.
But he said the deal was good for employees, customers and Nortel’s technologies.
“We always thought it was very important for us to be driving consolidation in the industry” through acquisitions, Zafirovski told the Journal. “This time, we will be on the other side of the transaction.”
The deal is subject to approval by both a US bankruptcy court and the Ontario Superior Court of Justice, Nokia Siemens said in a statement. Final sale hearings are expected on 28 July in the United States and 30 July in Canada.
It is expected to close in the third quarter.
Export Development Canada, Canada’s government-owned export credit agency, is supporting the deal with a $300 million loan commitment, NSN said.
Nortel said it would apply to delist its shares from the Toronto Stock Exchange.
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First Published: Sat, Jun 20 2009. 11 56 AM IST