Ericsson has entered into an asset purchase agreement to acquire the parts of the Carrier Networks division of Nortel relating to CDMA and LTE technology in North America.
The purchase is structured as an asset sale at a cash purchase price of $1.13 billion on a cash and debt-free basis. The announcement follows the completion of the auction process initiated by Nortel, and the transaction is subject to court and customary regulatory approvals.
Current CFO and Executive Vice President and soon-to-be CEO Hans Vestberg stressed during a conference call today that the acquisition is intended to bolster Ericsson's North American presence. "This is a very concentrated offering that we are buying with a focus on North America," he said.
The acquisition significantly expands Ericsson's footprint in North America, particularly as the region is emerging as an early adopter of LTE technology. The acquisition also provides Nortel's customers, many of which have expressed support for the acquisition, with a reliable supplier for the future.
While the CDMA portion of the business admittedly has a limited lifetime, Vestberg said the acquisition will benefit Nortel's current CDMA customers in North America as they transition to LTE.
The agreement includes important CDMA contracts with North American operators such as Verizon Wireless, Sprint, U.S. Cellular, Bell Canada and Leap, as well as LTE assets, certain patents and patent licenses relating to CDMA and LTE.
When asked whether there was any possibility that Research In Motion (RIM), which made an informal $1.1 billion bid for Nortel, might still have a shot at the deal, Vestberg said that while there were some “regulatory issues to be defined,” he had confidence in the process moving forward. RIM did not formally participate in the auction that ended Friday.