Ericsson to buy Nortel GSM business

OTTAWA – Ericsson, the Swedish wireless giant, is buying more Nortel Networks assets as part of a $103-million U.S. offer with its bid partner, Kapsch CarrierCom AG.

Nortel said Wednesday that Ericsson and Kapsch joined to buy GSM wireless assets. Ericsson paid $70 million to get the North American business while Kapsch paid $33 million to get the European and Taiwan business and a separate GSM railway communication business in which Nortel is a world leader.

Nortel did not disclose other bidders in the auction that started Tuesday in New York.

Ericsson previously bought Nortel’s big CDMA wireless and some advanced LTE product lines for $1.13 billion.

But the low price likely reflects the lack of industry interest in the assets. The Nortel GSM operation generated sales of $1.36 billion in 2008 and $588 million in the first nine months of this year, down 45 per cent from the same period a year earlier. It is believed to be losing money in an industry where Nortel was a second-tier player, except for the railway communication business.

Ericsson dominates the global GSM wireless particularly in Europe. The decision to buy just the North American business likely was a response to potential anti-trust issues. Its customers in North America include Rogers, Canada’s biggest wireless network.

Nortel said that the two purchasers will hire 680 employees in the division. This represents 80 per cent of the 850 permanent employees in the operation who are based in Dallas, Texas, France and China. Only nine work in Canada. Nortel also has 330 contractor employees in the operation.

With files from Reuters