Ericsson: Nortel Wireless Assets Boost North American Visibility2:44 PM EST Mon. Jul. 27, 2009
Ericsson took home Nortel Networks' carrier wireless business Friday with its $1.13 billion bid during a bankruptcy court auction.
And on Monday, Ercrisson's top executives said acquiring the struggling Canadian telecom giant's CDMA and LTE Access assets should make it a much stronger player in North America, a market Ericsson has traditionally had a tough time cracking.
The acquisition gives Ericsson access to Nortel's already installed North American CDMA customers along with its contracts with massive carriers such as Verizon Wireless, Sprint and U.S. Cellular. In 2008, Nortel's carrier wireless unit generated about $2 billion in revenue.
"Customers are an obvious asset," Ericsson CFO Hans Vestberg said on a conference call Monday, noting that Ericsson will continue to supply and support existing CDMA networks for the next few years.
The acquisition also gives Ericsson, the world's largest wireless network provider, a second chance to tackle the CDMA market in North America, an area where Ericsson previously failed, Ericsson CFO Hans Vestberg said on a conference call Monday.
In 1999, Ericsson acquired a unit from Qualcomm to settle a patent dispute over the CDMA technology developed by Qualcomm. That venture, however, went bust. At the time, Ericsson said it believed CDMA would proliferate globally. Instead, it stayed concentrated in the U.S.
"We believed CDMA technology would spread worldwide, and here it's very much focused on North America with a given footprint already," Vestberg said, adding that Ericsson foresees "a couple of years more" of investment in CDMA from carriers, followed by maintenance.
Vestberg also noted that the Nortel buy gives Ericsson the green light to expand into LTE access as many of the country's largest wireless carriers, such as Verizon Wireless and AT&T, start building out networks based on the 4G standard.
"We are improving our position to be part of that migration," he said, adding, "This is a very concentrated asset we are buying."
Ericsson's $1.13 billion bid bested the opening bid from Nokia Siemens Networks for $650 million.
Nokia Siemens started the bidding earlier this month as Nortel continued to search for ways to emerge from Chapter 11 bankruptcy protection. Nortel filed for bankruptcy protection in January.
So far, Nortel's carrier wireless CDMA and LTE access assets have been the only businesses scooped up. Nortel's enterprise solutions division, which consists of its data networking, voice and government solutions units, also is on the auction block with Avaya leading the charge with a $475 million bid. Bidding for that part of Nortel's business will continue for more than a month.
Vestberg said Ericsson expects the deal to go through approval despite protests from BlackBerry-maker Research In Motion (RIM), which last week issued a statement indicating that Nortel forced RIM out of the bidding for its carrier wireless assets. RIM has asked the Canadian government to investigate the sale, but Vestberg said Ericsson is confident bankruptcy courts will approve the purchase this week.
"We feel confident that this will go through," he said.