Ericsson takes Nortel wireless assets for $1.13 billion

Sat Jul 25, 2009 5:31pm EDT
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By Janet Guttsman and Frank McGurty

TORONTO (Reuters) - Sweden's Ericsson has won an auction for the wireless assets of bankrupt Nortel Networks Corp, paying $1.13 billion for the crown jewels of the one-time Canadian telecom star.

In separate statements, the two companies said on Saturday Ericsson had won the bidding for Nortel's key CDMA and next-generation LTE wireless technologies, which Nortel put on the block after it filed for creditor protection in January.

The assets include Nortel's businesses in the CDMA wireless technology used in North America and in the emerging LTE high-speed wireless technology that many of the world's biggest operators plan to use to upgrade their telecommunications networks, as well as some patents.

"This is both a sad story for Nortel and a happy story for Ericsson," Jeff Kagan, an independent telecom industry analyst, said in a note. "Rather than competing with Nortel, Ericsson has won."

He said the deal would enable the Swedish telecom gear maker to expand its North American footprint as the industry evolves toward so-called 4G LTE technology. When fully developed, the technology is expected to provide broadband-like access for cell phone users in terms of speed and content richness, Kagan said.

Ericsson's offer virtually assures Nortel will be broken up rather than emerge from bankruptcy protection as a slimmed-down single unit.

"I believe this is the right outcome at this point in time," Richard Lowe, president of Nortel's carrier operations, told Reuters in an interview on Saturday. "An orderly disposal of the assets of Nortel is the best outcome for the stakeholders."

Toronto-based Nortel, once North America's biggest maker of telephone gear, filed for bankruptcy protection early this year, blaming the economic crisis for derailing a turnaround effort that began in 2005.   Continued...

<p>A sign is pictured outside Nortel's Carling Campus in Ottawa July 24, 2009. Nortel Networks Corp, a former Canadian tech icon with roots going back to World War One, starts selling key assets on Friday in an auction process that has already polarized opinion and sometimes reads like a soap opera. REUTERS/Chris Wattie</p>