Ericsson snaps up Nortel's GSM business

Ericsson will pay $70m for Nortel's North American GSM business

Ericsson has won the bidding to acquire Nortel's North American GSM business in a deal worth $70m (£42m).

Ericsson will acquire an installed GSM base, allowing the firm to further expand its presence in the US and Canada. The Nortel GSM operations generated roughly $400m (£239m) in 2008.

As part of the agreement, Ericsson will offer employment to around 350 Nortel workers, making the US the largest geographical segment within Ericsson with 14,500 staff.

The bid was made in conjunction with Kapsch CarrierCom AG of Austria, which will pay $33m (£19m) to acquire several remaining assets outside the US, bringing the total value of the sale to $103m (£61m). Kapsch will also keep on approximately 330 employees.

The transaction is subject to approval by courts in the US and Canada, along with customary regulatory sanctions and other conditions.

Ericsson acquired Nortel's Code Division Multiple Access and Long Term Evolution assets in July.

Hans Vestberg, incoming president and chief executive of Ericsson, said that the current deal "emphasises our commitment to the North American market".

Julien Grivolas, a principal analyst with Ovum, said that the announcement came as no suprise and had be done to help strengthen Ericsson's position in the US market.

"Ericsson's position in the EU is already very strong and so by acquiring further GSM technology in North America Ericsson can protect itself and its customers against competitors for the future," he said.

"It also means it is well prepared for any future investment moves it may make in this market."

Nortel has been auctioning off parts of its business since January when it filed for bankruptcy protection. This latest announcement follows the news earlier in the week that Ciena had won the bidding to buy Nortel's optical networking and carrier Ethernet businesses for $769m (£462m).