In a dramatic turn of events in the bid for bankrupt Nortel's CDMA and LTE assets, Ericsson has emerged as the winner with a $1.13 billion bid following Friday's auction in New York.
Nokia Siemens Networks had set the stalking horse bid at $650 million and slowly more competitors came forward to up the ante. It only makes sense for Ericsson: It recently won a $5-billion network outsourcing deal with CDMA operator Sprint and earlier it won a big LTE deal with CDMA operator Verizon.
"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," Carl-Henric Svanberg, president and CEO, said in a statement. The company appointed Magnus Mandersson, currently head of Ericsson Northern Europe, as president of Ericsson CDMA operations. Richard Lowe from Nortel was named chief operating officer.
The news is a blow to NSN, which needed to get its foot into the North American market and said it was prepared to enter a bidding war to get Nortel's wireless assets. Ericsson was beating the vendor to the punch with early contracts, and now the Nortel deal appears to be the nail in the coffin. Ericsson now has the expertise it needs to help CDMA operators migrate to LTE as it takes over contracts with Verizon, Sprint, U.S. Cellular, Bell Canada and Leap.
Ericsson, which appears to be taking advantage of the fact that the poor economy isn't hurting it as much as its competitors, says the acquisition will have a positive effect on its earnings within a year after closing. Nortel's CDMA operations generated about $2 billion in 2008. It will fund the deal on a cash and debt free basis.
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