Alcatel and Nortel ink $320m UMTS deal

Alcatel announced Friday that it had signed a non-binding memorandum of understanding with Nortel to acquire its UMTS network radio access business and related assets for $320m (£168m).

Under the transaction, Alcatel said it “intends to acquire Nortel’s UMTS radio access technology and product portfolio, associated patents and tangible assets as well as customer contracts”. The French telecommunications firm, which completed its merger with Lucent earlier this year, said the deal will transform the company into one of the world’s largest UMTS suppliers.

Speculation about Nortel’s relationship with Alcatel has been fuelled by a trend in consolidation, principally Alcatel and Lucent, Nokia and Siemens and Ericsson and Marconi.

It goes on to say that Alcatel will benefit from “significantly strengthened research and development capabilities, amongst the most advanced in the world” especially in HSxPA and 3G Long-Term Evolution (3G LTE) technologies.

Mike Roberts, principal analyst at Telecoms.com’s parent Informa Telecoms & Media, believes the deal, while significant, will “not have a major impact in the UMTS/WCDMA market given that Alcatel-Lucent-Nortel will still be well behind market leaders Ericsson and Nokia Siemens.”

Roberts suggests that one of the principal challenges facing Alcatel will be integrating both Lucent and Nortel at roughly the same time. “The Alcatel-Nortel deal is interesting,” says Roberts, “in that it sharpens Nortel’s focus on next-generation mobility including OFDM-MIMO, which aligns nicely with the strategy of Motorola, another one of Nortel’s likely suitors.”

Alcatel said the deal remained subject to a number of conditions. However, the firm said it is aiming to complete the deal by year end. The firm’s said it is expected that Nortel’s UMTS employees will be transferred to Alcatel.

The French telecoms company is still rallying investors to support its acquisition of Lucent, which shareholders are expected to vote on next week.