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One of the final chapters of Nortel’s history changed dramatically when Ericsson emerged as the winner of an auction that ended late Friday night for Nortel’s most profitable business unit. It was just over a month ago that Nortel announced it would sell its CDMA and LTE Access units to Nokia Siemens for $650 million in a stalking horse agreement.
Nokia Siemens and investor MartinPatterson Global Advisers, one of Nortel’s largest bondholders, competed unsuccessfully for a deal that includes CDMA technology and contracts as well as patents and engineers working on LTE (long term evolution), a mobile broadband technology.
Ericsson is acquiring a unit that manufactures CDMA mobile technology, a system used by several U.S.-based mobile operators including Verizon Wireless and Sprint as well as Bell Canada and Leap plus a group of 400 researchers working on LTE. Once approved, the deal will give Ericsson a significant boost in its North American customer base, coming close to doubling its revenue in the region.
The transaction is on a cash and debt-free basis and is subject to customary regulatory approvals in addition to those of the bankruptcy courts overseeing Nortel’s liquidation.
Magnus Mandersson, presently head of Ericsson Northern Europe, will be appointed to the position of president of Ericsson CDMA operations, and Richard Lowe, currently at Nortel, will serve as chief operating officer.
“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 Ericsson CEO Carl-Henric Svanberg. Before the auction results were announced on Friday, Ericsson reported that its second-quarter profit had fallen to SEK 831 ($111 million) from SEK 1.9 billion due to the current economic climate and restructuring charges and losses at Sony Ericsson.
Jonathan B. Spira is the CEO and Chief Analyst at Basex.