June 21, 2009

Nokia Siemens Set To Buy Nortel Wireless Units

Nokia Siemens Networks, one of the largest telecommunications solutions suppliers in the world, announced Saturday that it will buy the wireless operations of Canadian-based Nortel Networks in a $650 million deal to strengthen its position in North American markets.

The Finnish-German joint enterprise said it was buying the LTE and CDMA assets of Nortel, a once powerful contender in the telecommunications equipment industry is now operating under bankruptcy protection and is now making arrangements for the liquidation of its business.

CDMA, or code division multiple access, is a competitive standard to the dominant cellular standard GSM, or global system for mobile, while Long Term Evolution, or LTE, is a next-generation wireless network technology.

According to Nokia Siemens, Nortel's pending bankruptcy status has subjected the transaction to the approval of both U.S. and Canadian courts. They added that it expected to have approval by July. The transaction was described as "a significant step towards strengthening its leadership" in LTE wireless technology.

Nortel is working to put the company with a 127-year history in Canada to rest as it sells its operations one-by-one.

Nortel CEO Mike Zafirovski, had hoped they would be able to revamp and sustain Nortel, but seeking bankruptcy protection in the U.S. and Canada made assets harder to sell.

Nortel spokesman Mohammed Nakhooda said, "After careful review Nortel has decided the sale of its businesses is the best path for Nortel to deliver on its stated objectives of maximizing value while preserving innovation, customer relationships and jobs to greatest extent possible."

"The process is well under way and the company is advancing in its discussions with external parties to sell its other businesses," he added. 

Zafirovski said their enterprise business, their optical Metro Internet business and their carrier voice over IP and application business as well as part of the wireless business are among the assets still up for sale.

Nortel also said it will request that its shares be taken from the Toronto Stock Exchange list.

Nortel has more than 25,000 employees worldwide. During the 1990s telecom and Internet boom, Nortel employed over 95,000 people. At one point in 2000 it could account for one-third of the entire Toronto Stock Exchange market value.

After the dot-com bust, Nortel encountered its own issues. It had an accounting crisis that triggered shareholder lawsuits, regulatory investigations and the firing of key executives, including CEO Frank Dunn.

Zafirovski, a former executive at Motorola Inc. and General Electric Co., was made CEO in late 2005. The next year, Nortel settled a $2.5 billion shareholder litigation over the bookkeeping scandal.

Zafirovski has overseen a series of disappointing work force cuts and restructurings in his effort to "re-create a great company," as he often said.

Nokia Siemens Networks is a joint venture of Nokia Corp., the world's top mobile phone maker, and German Siemens AG. It employs 60,000 people worldwide.

"The acquisition of Nortel's profitable CDMA business would significantly improve Nokia Siemens Networks' presence in North America and make it a leading supplier of wireless infrastructure products in the region," the Finland-based company said.

The deal would mean that more than 2,500 Nortel employees, presiding mostly in Canada and the United States, would find themselves being transferred to Nokia Siemens Networks. Nokia Siemens says that Canada's government-owned export credit agency, Export Development Canada, would support the transaction with a $300 million loan commitment.

Nortel reported a net loss in their first quarter this year of $507 million with revenue falling by 37%from 2008 to $1.7 billion.

Nortel's customers, including Canada's leading telecommunications company Bell, welcomed the deal which Nokia Siemens claims would ensure the continuation of Nortel's research and development sector.

"As Nortel's largest customer in Canada, Bell supports Nokia Siemens' plan to continue to foster Nortel's long history of research and development in Canada," said Stephen Howe, spokesman for Bell Mobility.

"This news eliminates industry uncertainty and enhances CDMA ... today and in the future," said Dan Hesse, CEO of Kansas City-based Sprint Nextel," he added.


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