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7/27/2009
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Ericsson To Acquire Nortel's CDMA, LTE Units For For $1.13 Billion

Smartphone maker Research In Motion is planning to challenge the sale of the wireless carrier service to the Canadian government.

Nortel Networks has announced the sale of its prized CDMA/LTE unit for the second time in recent weeks -- this time to Ericsson for $1.13 billion -- but Research In Motion is planning to challenge the sale to the Canadian government.

Nokia Siemens Networks appeared to have the sale of the Nortel unit -- parts of its Carrier Networks division -- locked up last spring when it bid $650 million in a "stalking horse" auction in which other bidders can emerge later to submit higher bids.

In an auction Friday night in New York City, Ericsson emerged as the winning bidder and its $1.13 billion offer satisfied Nortel. Earlier RIM had said it was prepared to offer $1.1 billion for the CDMA/LTE operation, but was blocked from bidding by auction rules. Another bidder, New York's MatlinPatterson Global Advisors, a private equity fund, participated in the early bidding, but dropped out.

Noting that the unit will strengthen its North American business, Ericsson noted that the region is emerging as an early adopter of LTE technology, which is the next generation of wireless carrier service.

"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," said Carl-Henric Svanberg, president and CEO of Ericsson, in a statement. "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."

However, Research In Motion, noting that both Nortel and RIM are Canadian companies, has sought intervention by the Canadian federal government in the issue. In a statement issued after the bidding, RIM said: "Now that the auction is completed, the government has the authority and responsibility to get involved to protect vital Canadian interests." RIM was not immediately available Monday to elaborate on the statement.

Before the auction, Jim Balsillie, RIM's co-chief executive, said the firm was "blocked at every turn" from bidding for the Nortel unit. "RIM is extremely disappointed that Nortel's world leading technology, the development of which has been funded in part by Canadian taxpayers, seems destined to leave Canada."

Nortel, which has been in bankruptcy proceedings since January, said RIM couldn't bid for the CDMA/LTE unit because RIM didn't comply with bankruptcy court proceedings.

While CDMA is currently a thriving carrier technology, LTE is considered to be the next wave of the future. In the US, Verizon Wireless and Sprint are the leading users of CDMA and Verizon is planning to begin rolling out its LTE service late this year. LTE is more robust than CDMA by an order of magnitude and most of the world's leading carriers plan to eventually switch over to it in the coming years. Most of the world's current carriers use GSM infrastructure but most of them, too, plan eventually to switch to LTE.

Ericsson said Magnus Mandersson has been named president of Ericsson CDMA operations. Mandersson is currently serving as head of Ericsson Northern Europe. Richard Lowe, currently president of Nortel's carrier networks, has been named chief operating officer of the CDMA/LTE operation.


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