LG Elec, Nortel To Set Up JV To Provide Telecom Systems"
SEOUL -(Dow Jones)- South Korea's LG Electronics Inc. (066570.SE) said Monday it has signed a preliminary agreement with Canada's Nortel Networks Corp. (NT) to set up a joint venture to provide telecommunications equipment and networking systems to Korea and other markets globally.
Financial terms weren't disclosed.
In joint press release Monday, the companies said the 50-50 joint venture is subject to signing a definitive agreement.
The two companies expect to complete the deal in the second quarter of 2005.
Bill Owens, president and chief executive of Nortel, said at a signing ceremony Monday that both LG and Nortel "will be stronger as a result of this partnership."
"To be a global communications player, it is imperative for us to expand our market share and compete in Asia," he said.
Owens said Nortel's existing operations in Korea will be rolled into the joint venture.
LG Electronics' chief executive and vice chairman, S.S. Kim, said at a press conference following the signing ceremony that his company will now focus strictly on the sales of mobile handsets. LG's existing telecom equipment business will be handled by the new joint venture, he said.
Under the agreement, Owens said Nortel will own 50% plus one share in the joint venture.
The joint venture plans to have five directors, two of them from LG Electronics, while three will come from Nortel. A chief executive will be appointed by LG, while a chief financial officer will be named by Nortel.
S.S. Kim said the preliminary agreement with Nortel will "prove to be the best choice for us to meet the changing market conditions and competitive environment" in the telecommunications equipment industry.
The two companies had been in talks to set up a joint venture since August 2004, Kim said.
Nortel and LG Electronics said the joint venture will market the entire Nortel portfolio of optical, wireless, wireline and enterprise products in Korea and other markets.
Furthermore, LG Electronics plans to collaborate with Nortel in setting standards for next generation devices and developing technologies.
"Based on this, LG Electronics is expected to reduce the developing time for next-generationt terminals and maintain its leading technology in the global mobile phone market," it said in a statement.
At 0257 GMT, shares of LG Electronics were up 0.4% at KRW71,800. The broader market was up 0.3%.
-By Yun-Hee Kim, Dow Jones Newswires; 822-732-2165; yun-hee.kim@dowjones.com
-Edited by Jessica Tan
(END) Dow Jones Newswires"
Posted to the site on 24th January 2005
