Ericsson to buy Nortel unit

Will pay $1.13 bn for insolvent co’s wireless equipment division.

Ericsson AB will buy the wireless-equipment unit of insolvent Nortel Networks Corp for $1.13 billion in cash after beating out bids from Nokia Siemens Networks and MatlinPatterson Global Advisers LLC.

The auction process has been completed, Stockholm-based Ericsson said today in a statement on its Web site. Nortel, led by Chief Executive Officer Mike Zafirovski, is selling off businesses after filing for bankruptcy protection six months ago.

The division supplies mobile-phone systems based on the code-division multiple access standard used by many North American networks. The unit also includes gear based on long-term evolution technology, supported by the two biggest US phone companies, that will power Web-equipped phones.

“It’s going to be an important technology from 2012 onward,” said Neeraj Monga, an analyst at Veritas Investment Research Co in Toronto.

Licensing LTE technology to handset makers may be worth as much as $2.9 billion in royalties during the next 15 years, based on Nortel’s own predictions, JP Morgan Securities said last month. The standard’s future significance probably helped attract the variety of bidders, Monga said.

Research In Motion Ltd, the maker of the BlackBerry phone, also expressed interest in acquiring the Nortel business. The market for so-called smart phones such as the BlackBerry, on which you can watch videos and surf the Web, grew 13 per cent in the first quarter as the mobile-phone industry overall shrank, according to researcher Gartner Inc.

Court approval
At least 2,500 Nortel employees will be offered positions with Ericsson, Nortel said in a separate e-mailed statement today. The US and Canadian court approvals will be sought at a joint hearing on July 28, and the companies will seek to complete the transaction later this year, it said.

Nortel plans to hold a similar auction for its corporate-networking business this quarter. The company agreed to sell the division to Avaya Inc for $475 million, pending higher bids.

The Toronto-based company, once North America’s largest phone-equipment maker, filed for protection from creditors in the US and Canada in January. Nortel reported a loss of $5.8 billion last year as customers froze spending on new equipment amid the recession.

Representatives from Nortel and Ericsson will hold a conference call for reporters and analysts on July 27.