Ericsson to Buy Nortel's North American GSM Business
IT News Online Staff
2009-11-25
Ericsson announced that it will acquire certain assets of the Carrier Networks division of Nortel relating to Nortel's GSM business in the U.S. and Canada. The purchase is structured as an asset sale at a cash purchase price of $70 million on a cash and debt free basis, subject to adjustments.
This announcement follows the completion of the auction process initiated by Nortel, and the transaction is subject to approval by courts in the U.S. and Canada and customary regulatory approvals and other conditions.
Ericsson's bid for Nortel's GSM assets was made together with Kapsch CarrierCom AG of Austria. Under the agreements, Ericsson is acquiring certain assets of Nortel's GSM business in North America, while Kapsch is paying $33 million to acquire most of the remaining assets outside North America.
Ericsson acquires an installed GSM base, which expands its North American footprint. Ericsson said the acquisition further strengthens its ability to serve North America's leading wireless operators, which now benefit from the strength of the combined resources in an experienced and financially strong company.
"Along with our recent acquisition of Nortel's CDMA and LTE assets, the transaction emphasizes Ericsson's commitment to the North American market and strengthens our position as a leading provider of telecommunications technology and services in the U.S. and Canada," said Hans Vestberg, incoming President and CEO of Ericsson. "Our Ericsson family will be once again enriched by the addition of the valuable Nortel employees."
The agreement includes the transfer of important GSM business with North American operators such as AT&T and T-Mobile. Under the agreement, Ericsson will offer employment to around 350 employees from Nortel. Nortel's North American GSM operations generated around $400 million in 2008.
Ericsson's North American business generated SEK 17.9 billion ($2.7 billion) of sales in 2008, mainly from GSM and WCDMA equipment and associated services. Together with the recently announced acquisition of CDMA and LTE assets as well as the Sprint services agreement, the acquisition makes North America the largest geographical segment within Ericsson and encompasses some 14,500 employees, up from 5,000 at the beginning of 2009.
The acquired operations will contribute top- and bottom-line additions to Ericsson. The company said the transaction is expected to have a positive effect on its earnings within a year after closing.
SEB Enskilda is acting as Ericsson's sole financial advisor in the transaction.
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