Ericsson's winning bid for Nortel's wireless assets is intended to strengthen the Swedish telecom giant's presence in North America, company executives said during a conference call Monday.
Ericsson won Nortel's Code Division Multiple Access (CDMA) and Long Term Evolution (LTE) wireless networking business with a $1.13 billion offer, almost twice the initial "stalking horse" bid of $650 million by Nokia Siemens. Ericsson also bested a bid by New York private equity firm MatlinPatterson.
"This is of strategic importance to us, especially in North America," said Carl-Henric Svanberg, president and CEO of Ericsson. "CDMA will go on for many more years [but North American operators will be among] the first to migrate to LTE, which is of strategic importance to us."
Ericsson will inherit 2,500 Nortel employees, 400 of which are focused on LTE, the 4G successor to 3G wireless networks built on CDMA technology. Nortel customers in North America that will now be supplied by Ericsson include Verizon Wireless, Sprint, U.S. Cellular, Bell Canada, Leap and Telus.
Ericsson already had some presence in these accounts but this deal makes the company a larger and more strategic supplier to these operators.
Indeed, Ericsson recently announced an agreement with Sprint to operate its wireless and wireline networks. About 6,000 Sprint employees with join Ericsson under the seven-year deal.
Combining that with Ericsson's current North American revenue and presence, and with the revenue and manpower it will obtain from Nortel, Ericsson will have 14,000 employees and $5 billion in revenue from North America, company executives said.
"This is a concentrated asset on North America, with a good management team," said Hans Vestberg, Ericsson CFO and incoming CEO and president. "We are plugging this in to strengthen our North American business … and we are improving our position to be part of that [CDMA to LTE] migration."
Ericsson expects U.S. and Canadian court approval of the deal on July 28. Completion of the deal is expected in the third quarter with "full effect" of top line revenue recognition in the fourth quarter, Vestberg said.
Ericsson executives said they have no current plans to bid on other Nortel assets.