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Ericsson acquires Nortel LTE, CDMA assets

Posted: 29 Jul 2009 ?? ?Print Version ?Bookmark and Share

Keywords:CDMA? Ericsson Nortel deal? LTE?

Ericsson has agreed to acquire the parts of the carrier networks division of Nortel relating to CDMA and Long Term Evolution (LTE) technology in North America. The purchase is structured as an asset sale at a cash purchase price of $1.13 billion on a cash and debt free basis.

Ericsson acquires an installed base and a healthy business that provides major operators CDMA technology and support services. In addition, the acquisition strengthens Ericsson's ability to serve North America's leading wireless operators in the evolution to LTE. The acquisition expands Ericsson's footprint in North America, particularly as this region is emerging as an early adopter of LTE technology. The acquisition also provides Nortel's customers with a strong and reliable supplier for the future, many of which have expressed support for this acquisition.

"Acquiring Nortel's North American CDMA business allows us to serve this important region better as we build relationships for the future migration to LTE. Furthermore, by adding some 2,500 highly skilled employees, of which about 400 are focused on LTE research and development, Ericsson reinforces and expands a long-term commitment to North America. This deal, along with our recently announced Sprint service agreement, truly positions Ericsson as a leading telecoms supplier in North America," said Carl-Henric Svanberg, president and CEO of Ericsson.

The agreement includes important CDMA contracts with North American operators such as Verizon, Sprint, U.S. Cellular, Bell Canada and Leap, as well as LTE assets, certain patents and patent licenses relating to CDMA and LTE. Nortel's customers will also benefit from the continued support of Nortel's installed CDMA base and the migration path to LTE.

Nortel's North American CDMA operations generated approximately $2 billion in 2008, with robust profitability from a good product mix, which includes a significant amount of services. Going forward, research and development costs are expected to be relatively low in CDMA compared with other technologies.

Ericsson's North American business generated $2.7 billion of sales in 2008, mainly from GSM and W-CDMA equipment and associated services. When coupled with the recently announced Sprint services agreement, this acquisition makes North America the largest region within Ericsson and encompasses some 14,000 employees.

"The agreement with Ericsson provides a strong and stable future for Nortel's CDMA and LTE business. Customers will enjoy continued strong support from an industry leader as they look to evolve to LTE. Many employees will also have the opportunity to continue their work with Ericsson, bringing their innovation power and creativity to the wireless industry for years to come," said Richard Lowe, president of carrier networks at Nortel.

Consummation of the transaction is subject to approval by the United States and Canadian Bankruptcy Courts and the satisfaction of regulatory and other conditions.





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