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Ericsson Outbids Nokia Siemens Networks for Nortel Assets

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Erics son has snatched a deal from under the noses of Nokia Siemens Networks (NSN) after it won the bidding to buy Nortel Networks carrier assets. Last month, NSN agreed to buy parts of Nortel's Carrier Networks division relating to CDMA and LTE technology in North America for a payment of USD650 million. However the deal allowed counter bids, and Ericsson has offered USD1.13 billion, significantly outbidding NSN.

As Nortel is under court managed bankruptcy protection, the transaction is subject to court and customary regulatory approvals. Earlier this week, handset manufacturer, Research in Motion complained that it had been locked out of the auction. It could possibly still interfere in the deal by asking the bankruptcy court to review how the sale was conducted by Nortel.

The agreement includes important CDMA contracts with North American operators such as Verizon, Sprint, U.S. Cellular, Bell Canada and Leap, as well as LTE assets, certain patents and patent licenses relating to CDMA and LTE.

"Acquiring Nortel's North American CDMA business allows us to serve this important region better as we build relationships for the future migration to LTE. Furthermore, by adding some 2,500 highly skilled employees, of which about 400 are focused on LTE research and development, Ericsson reinforces and expands a long-term commitment to North America. This deal, along with our recently announced Sprint service agreement, truly positions Ericsson as a leading telecoms supplier in North America," said Carl-Henric Svanberg, President and CEO of Ericsson.

Nortel's North American CDMA operations generated approximately USD2 billion in 2008, with robust profitability from a good product mix, which includes a significant amount of services. Going forward, research and development costs are expected to be relatively low in CDMA compared with other technologies. Ericsson's North American business generated USD2.7 billion of sales in 2008, mainly from GSM and WCDMA equipment and associated services. When coupled with the recently announced Sprint services agreement, this acquisition makes North America the largest region within Ericsson and encompasses some 14,000 employees.

Responding to Ericsson's win, Bosco Novak, Chief Markets Operations Officer, Nokia Siemens Networks said "Our final offer for Nortel's assets represented a fair price, and we did not enter this process with a win-at-any-cost mindset," adding that "Ours was an opportunistic bid aimed at supporting the great progress we've made in North America in the past 18 months, and we are very confident that momentum will continue to grow."

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