Ericsson to Buy Nortel Wireless at $1.1Billion, after Winning Auction

Nortel is long in news now. Earlier, we have talked about Avaya’s plan with Nortel. And today that fate of Nortel has been taken further, Ericsson has won the bidding over the wireless division of Nortel Networks, agreeing to pay US$1.13 billion for Nortel’s CDMA business and LTE Access technology 4G.

How does it Benefit Ericsson?

The deal 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 under Chapter 11 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.

RIM 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 tend to reassure customers, with the statement:

“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 at the official Nortel website.

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 that it expects to close the deal by the end of the year.

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