LM Ericsson Telephone Co. (ERIC) has been selected as successful bidder to acquire certain assets of the Carrier Networks division of Nortel relating to Nortel’s GSM business in the U.S. and Canada. The purchase is structured as an asset sale at a cash purchase price of $70 million on a cash and debt free basis, subject to adjustments. This announcement follows the completion of the auction process initiated by Nortel, and the transaction is subject to approval by courts in the US and Canada and customary regulatory approvals and other conditions.
Ericsson’s bid for Nortel’s GSM assets was made together with Kapsch CarrierCom AG of Austria. Under the agreements, Ericsson is acquiring certain assets of Nortel’s GSM business in North America while Kapsch is paying $33 million to acquire most of the remaining assets outside North America.
Ericsson acquires an installed GSM base, which expands its North American footprint.
The agreement includes the transfer of important GSM business with North American operators such as AT&T and T-Mobile. Under the agreement Ericsson will offer employment to approximately 350 employees from Nortel. Nortel’s North American GSM operations generated approximately $400 million in 2008.
The acquisition makes North America the largest geographical segment within Ericsson and encompasses some 14,500 employees, up from 5,000 at the beginning of 2009. The acquired operations will contribute top- and bottom-line additions to Ericsson. The transaction is expected to have a positive effect on Ericsson’s earnings within a year after closing.
Ericsson is the world’s leading provider of technology and services to telecom operators. Ericsson is the leader in 2G, 3G and 4G mobile technologies, and provides support for networks with over 1 billion subscribers and has a leading position in managed services. The company’s portfolio comprises of mobile and fixed network infrastructure, telecom services, software, broadband and multimedia solutions for operators, enterprises and the media industry. Its major competitor is Alcatel-Lucent (ALU).
We currently have a Neutral recommendation on ERIC.
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