Tuesday, July 28, 2009

Ericsson confident of Nortel sale, but braced for hurdles

Jamie Sturgeon | Financial Post | July 28, 2009

Swedish telecommunications giant Ericsson said Monday it was confident that its acquisition of Nortel Networks Corp.'s wireless business would be approved by bankruptcy courts as well as Canadian and U.S. regulators, but acknowledged that hurdles remain.

Primarily, Hans Vestberg, chief financial officer of Ericsson noted Canadian technology giant Research In Motion Ltd.'s attempts to interfere with the sale, including urging federal authorities, which still must approve the deal, to intervene.

"We feel confident that this will go through but we have a lot of respect for the process that will come," Mr. Vestberg said on a conference call. "There are some regulatory issues left to be defined."

Ericsson won a three-way auction for most of bankrupt Nortel's wireless assets early Saturday, agreeing to pay US$1.13-billion for the Toronto-based company's technology and certain patents related to CDMA and LTE wireless network technologies.

The unit, Nortel's biggest by revenue, makes and develops CDMA networks used by many major mobile-phone carriers including Bell Mobility and Telus Corp., as well as next-generation Long-Term Evolution, or LTE networks.

Led by North American carriers, LTE, which will be able to deliver data at high speeds to mobile devices even more sophisticated than today's smart phones such as Apple Inc.'s iPhone or RIM's BlackBerry, is poised to become the global standard over the next several years.

Ericsson outbid European telecom rival Nokia Siemens Networks, as well as U.S. private equity firm MatlinPatterson Global Advisers LLC.

Waterloo, Ont.-based RIM has expressed interest in the assets, saying last week it would have bid as much as US$1.1-billion for them, but said it was blocked by Nortel from participating in the auction.

In a statement released late Sunday, RIM said it remained interested in pursuing certain assets, and urged Canadian authorities to review the sale, which would see Nortel's extensive technological base fall to a foreign firm.

"The government has the authority and responsibility to get involved to protect vital Canadian interests," the company said.

Tony Clement, the federal Industry Minister, has said it was his preference to see Nortel's technology remain in Canada, but has so far declined to step into the sale process.

Nortel will bring a request to have the sale approved by bankruptcy courts in the U.S. and Canada on Tuesday. The deal will also be subject to further regulatory approval.

Mr. Vestberg said Ericsson expects the deal to close late in the third quarter and have the business fully integrated by the fourth.

He said that while there were synergies to be found between its existing North American operations and the new assets, Ericsson planned to keep Nortel's wireless operations in Dallas and Ottawa unchanged for the time being.

The unit employs about 2,500 people, with about 800 workers based in Canada, primarily in Ottawa, Nortel's historical research and development hub.

Nortel, an icon of Canada's technology sector for more than a century, filed for bankruptcy protection in January, citing the recession for thwarting a turnaround plan begun in 2005 with the appointment of Mike Zafirovski, the company's current chief executive.

The company, which has its shares delisted from the Toronto Stock Exchange on June 26, is in the process of selling off its major business lines.

-30-