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30 July 2009


Ericsson to add LTE muscle with Nortel deal

Ericsson has gained court approval for its proposed $1.13 billion takeover of Nortel's wireless networking division, a deal that will give the communications giant increased presence in North America, and continue Nortel's initial development of the Long-Term Evolution (LTE) protocol.

The Swedish company, which outbid rival networking giant Nokia Siemens Networks (NSN) and private equity group Matlin Patterson in an auction of Nortel's wireless assets last week, will take on at least 2500 ex-Nortel employees, of which 400 are working on LTE development.

Following approval by Canadian and US courts, the Nortel assets should be transferred to Ericsson later this year without any additional balance-sheet cash or debt implications.

Completions of the deal is not yet certain, however. Blackberry maker Research in Motion (RIM), which did not take part in the Nortel auction, is likely to be pressing the Canadian government to block the deal.

Before the auction took place, when it appeared more likely that NSN would win the bid for Nortel's wireless assets, RIM released a statement criticizing Nortel for restrictions it had placed on the sale. It also suggested that the development of LTE technology, funded in part by Canadian tax-payers, ought to remain under Canadian, rather then foreign, ownership.

RIM's co-CEO Jim Balsillie said: "RIM is extremely disappointed that Nortel's world-leading technology seems destined to leave Canada and that Canada’s own Export Development Corporation is preparing to help by lending $300 million to another bidder.”

Balsillie had expected that other bidder to be NSN, not Ericsson, and the Swedish company has not yet said whether it will receive the same financial incentive. But Ericsson is convinced that it has picked up a key asset at a good price:

“The acquisition significantly expands Ericsson's footprint in North America, particularly as this region is emerging as an early adopter of LTE technology,” the Swedish company said. “The acquisition also provides Nortel's customers with a strong and reliable supplier for the future, many of which have expressed support for this acquisition.”

GaAs and GaN device manufacturers including TriQuint Semiconductor, already a supplier to both Ericsson and Nortel, and RF Micro Devices are looking to LTE network deployment as a future opportunity for RF devices in wireless infrastructure applications.

At the 3GSM trade show in Barcelona earlier this year, high-end power amplifier maker Anadigics even revealed early devices for future LTE-enabled mobile phones. Although the precise timing of any LTE network launch remains uncertain, US operator Verizon has said that it will offer the first such service at some point in 2010. In April, it released an initial set of technical specifications for LTE devices.

According to Ericsson CEO Carl-Henric Svanberg, wireless voice traffic should migrate from CDMA to LTE as voice-over-IP technology becomes dominant, although he also believes that CDMA will continue to carry voice traffic for at least another seven years.

Hans Vestberg, Ericsson's CEO-in-waiting (Svanberg is destined to take charge of the energy giant BP early next year), said during an investor call that the Nortel deal would “add LTE muscles” to its existing development efforts in that area, describing it as a “step increase” in its LTE investment.

See related item:

Nortel files for bankruptcy protection during restructuring

Search: Nortel



The author Michael Hatcher is a freelance journalist based in Bristol, UK.