Ericsson says it has entered into an asset purchase agreement to acquire the parts of the Carrier Networks division of Nortel relating to CDMA and LTE technology in North America for an estimated price of about $1.13 billion. Ericsson beat out other bidders Nokia Siemens Networks (NSN) and private equity firm, MatlinPatterson Global Advisors. NSN had bid $650 million for the business back in June. According to a Nortel spokeswoman, the deal does include some intellectual property rights, but excludes a small number of 4G wireless patents. We’ll have to wait till Monday, when the two companies plan to have a conference call to share the details with rest of us. The Swedish giant expects this acquisition will help it expand its footprint in North America and strengthen its ability to serve North America’s leading wireless operators in the evolution to 4G LTE. Ericsson recently took over the management of Sprint’s wireless networks as well. The company will get 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 North American CDMA operations generated approximately $2 billion in revenues for 2008 and were profitable. Ericsson’s North American business generated $2.7 billion in sales for 2008, much of it coming from the sale of GSM and WCDMA equipment and services. If Ericsson does manage to swallow this business, it would become one of the key suppliers of LTE equipment, whose demand is expected to shoot up as the majority of the world’s carriers transition to 4G wireless networks. Ericsson knows that, and that is why it was aggressive in bidding for this business unit.
“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. Here is a link to the Nortel press release.