Nortel sells LTE, CDMA units to Nokia Siemens

Troubled Canadian vendor Nortel continued its fire sale over the weekend, agreeing to offload its LTE and CDMA businesses to German-Finnish joint venture Nokia Siemens Networks.

The proposed acquisition – valued at $650m  – will bolster NSN’s presence in North America, making it one of the leading suppliers of CDMA kit in the region. It also strengthens the vendor’s existing relationship with key US CDMA players such as Verizon Wireless and Sprint, which have also confirmed plans to roll out LTE in the future.

In accordance with the US Bankruptcy Code – Nortel is presently sheltering in Chapter 11 Bankruptcy Protection – the Canadian firm has filed for a bidding procedure that invites higher offers. However, it seems unlikely that any rival bidders will come forward.

The transaction will see more than 2,500 Nortel employees, located mainly in Ottawa, Canada and Dallas, US, as well as those in Mexico and China, transferred to NSN. Around 400 of these are focused on LTE research and development.

Mike Roberts, principal analyst at Informa Telecoms & Media said that this latest development signalled the end of the line for Nortel, “This takes the company out of the mobile business, and it looks like the rest of the company is being sold off piecemeal.”

Recently there has been plenty of speculation that the firm is considering selling its controlling stake in Korean joint venture LG-Nortel, in which it is a partner with local manufacturer LG Electronics, for anything up to $1bn. It is also thought the company is still considering the sale of its crown jewels – its Metro Ethernet unit, which it took off the market in February.

Roberts said that the writing was effectively on the wall when the company went into Chapter 11, “Customers stopped ordering with them, and the management did too little too late,” he said. The analyst does not expect any of NSN’s rivals to come in with a bigger bid. “There might be someone out there willing to pay more, but the list is pretty small. Huawei maybe, but acquisition is not their chosen mode of expansion. Saying that, Nortel is understood to have some R&D worth having,” he said.

The deal also has the approval of Export Development Canada (EDC), Canada’s government-owned export credit agency, which is supporting the move with a $300m loan commitment.

Nortel has delisted its shares from the TSX as of Monday and said over the weekend that it is in advanced discussions with other parties with a view to selling other parts of its business.

Commenting on the announcements, Nortel president and CEO, Mike Zafirovski said the deal, “will ensure Nortel’s strong assets – technologies, customer relationships, and employees – continue to play an important role in driving the future of communications.  The value of Nortel’s wireless business is recognised throughout the industry.  The agreement we are announcing today is solid proof of that value and represents the best path forward for our other businesses.”

In a recent interview with telecoms.com, Tarek A. Robbiati, the chief executive officer of CSL, Hong Kong’s first-placed mobile carrier, predicted that Chinese vendors will come to dominate the global mobile infrastructure market. “Further consolidation will come in the next three to five years. In the end there will be only three [infrastructure vendors] left, and two of them will be Chinese. The European vendors are just too slow,” he said.

On that note Roberts said that he had heard of concerns among the carrier community about the lack of competition between vendors. “There is concern that numbers are dwindling quite rapidly,” he said. “The Alcatel Lucents and Ericssons look viable now, but for how long will that continue?”