Ericsson buys Nortel wireless units for $1 billion
STOCKHOLM: Swedish wireless equipment maker LM Ericsson on Saturday said it had penned a deal to buy a majority of Nortel Networks' North American wireless business for $1.13 billion.
The Stockholm-based group said the purchase is on a cash and debt-free basis and covers the older CDMA and newer LTE wireless businesses of Nortel's Carrier Networks unit.
Nortel on Friday placed its wireless business up for auction behind closed doors in New York City, and international tech industry titans submitted their best offers for the prized division.
The deal is subject to approval by relevant authorities.
Ericsson CEO Carl-Henric Svanberg said in a statement that the acquisition would add 2,500 employees to his company, of which about 400 are focused on LTE research and development.
"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," he said.
Under the deal, Ericsson will get CDMA contracts with North American operators such as Verizon, Sprint, U.S. Cellular, Bell Canada and Leap, as well as LTE assets, and certain patents and patent licenses relating to CDMA and LTE.
According to Ericsson, Nortel's North American CDMA operations generated $2 billion last year.
"Going forward, research and development costs are expected to be relatively low in CDMA compared with other technologies," Ericsson said.
CDMA, or code division multiple access, is a rival standard to the dominant cellular standard GSM, or global system for mobile, while LTE, or long-term evolution, is a next-generation wireless network technology that promises to be much faster.
In 2008, Ericsson's North American business generated around $2.7 billion of sales.
The group said that including its recent services agreement with Sprint, Saturday's deal will make North America its largest region, with around 14,000 staff.
Ericsson expects the acquisition to have a positive effect on its earnings within a year after closing, it said.
Magnus Mandersson, currently head of Ericsson Northern Europe, has been named President of Ericsson CDMA operations, and Richard Lowe of Nortel the chief operating officer.