& cplSiteName &

Ericsson: Why We Want Nortel's Wireless

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan

Ericsson today stated the rationale for its $1.13 billion bid for Nortel's North American CDMA business and Long Term Evolution (LTE) assets. (See Ericsson Delivers Knockout Blow to NSN.)

On the day before the joint hearing of the U.S. Bankruptcy Court and Ontario Superior Court of Justice that is scheduled to approve the winning bid for Nortel's wireless assets, CFO and soon-to-be CEO Hans Vestberg expressed confidence in his company's bid and spelled out why the acquisition makes sense to the Swedish vendor. (See Nortel Auction: NSN Bid $1B+.)

Vestberg said the $1.13 billion price tag for Nortel's wireless assets was "relevant and correct and good."

So, what's in it for Ericsson?

In a nutshell, for just over $1 billion, the Swedish vendor gains a cash-generating and profitable (albeit declining) CDMA business, a CDMA customer base, and a better position to win future LTE deals from operators looking to migrate from CDMA to LTE. (See Nortel Wireless Winner: It's Ericsson! and Ericsson Wins Nortel Wireless Auction.)

CDMA business
Even though Vestberg noted the CDMA business was in "gradual" decline, he said the business would generate an operating margin of more than 10 percent this year. Nortel's CDMA business generated revenues of about $2 billion in 2008 and is on track to deliver $1.3 billion in revenues this year. (See Services Save Ericsson in Q2.)

One explanation for being able to achieve this year what Vestberg described as a "robust, double-digit" operating margin is that the 2,100 employees attached to the CDMA business as part of the deal have already been downsized "quite considerably."

"The number of employees is lower than [Nortel] is actually running with," said Vestberg, adding that he did not see the need for redundancies after the deal closes. "The business we're taking over has the relevant resources needed."

Vestberg said he believes the North American CDMA operators will continue to invest in infrastructure for two more years -- after that the business will be primarily maintenance work.

"Even [with] declining growth, it's a good, profitable business. It has a good product mix, including a significant amount of services."

But Vestberg could not specify exactly how much of Nortel's CDMA business was generated from services.

LTE assets
Ericsson says Nortel's LTE assets, which includes 400 engineers, will add to its own R&D efforts in this area and fill a technology gap it didn't already have -- that is, CDMA-to-LTE migration capabilities -- which it needs to keep its flagship LTE customer, Verizon Wireless , happy.

"The migration of CDMA to LTE -- that's an asset we needed to build up anyhow," said Vestberg. "We'll see these resources work with CDMA migration, while our own LTE R&D [focuses on WCDMA migration]. It's a step-increase on our investment in LTE."

What would Ericsson get exactly?
Vestberg did not spell out in any detail what Ericsson was acquiring in terms of products, nor did he name which of the customer accounts were new to Ericsson.

According to bankruptcy court filings, the CDMA products that are part of the deal are the current versions and versions under development of these products: CDMA base transceiver station (BTS), base station controller (BSC) and enhanced BSC, radio network controller, mobile switching center, home location register, media gateway, gateway controller, billing manager, SS7 signaling gateway software, and associated OAM (operations, administration, and maintenance) software systems.

The LTE products associated with the deal, according to the court documents, are the eNodeB (base station), which includes a universal digital module (UDM) and a universal radio module (URM), and associated element management systems.

— Michelle Donegan, European Editor, Unstrung

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
Wednesday, October 26, 1:00PM EDT
Security: Tackling DDoS
Gary Sockrider, Principal Security Technologist, Arbor Networks
Friday, October 28, 1:00PM EDT
Security: The Plusses and Minuses of Open Source Software
Nick Feamster, Acting Director, Center for Information Technology Policy, Princeton University
Wednesday, November 16, 1:00PM EST
SDN 101
John Isch, Practice Director, Network & Voice, Orange Business Services
Friday, November 18, 1:00PM EST
SDN & Open Source
Christopher W. Rice, Senior Vice President of AT&T Labs, Domain 2.0 Architecture and Design
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
Next-Generation Technology Beyond DOCSIS 3.1

10|20|16   |     |   (0) comments

At SCTE 2016, Huawei's Liu Jianhua speaks with Alan Breznick for an exclusive interview.
LRTV Custom TV
Hybrid Video Solutions to Change TV, Change Future

10|20|16   |     |   (0) comments

At SCTE 2016, Huawei's Ian Locke speaks with Alan Breznick for an exclusive interview.
LRTV Custom TV
Huawei Future-Oriented Giga Coax Network

10|20|16   |     |   (0) comments

At SCTE 2016, Huawei's Allen Wang speaks with Alan Breznick for an exclusive interview.
LRTV Custom TV
Huawei at SCTE 2016

10|20|16   |     |   (0) comments

Join Alan Breznick of Light Reading and take a sneak peek at the Huawei booth at SCTE 2016.
LRTV Custom TV
Assuring Network Quality in a Rapidly Changing Environment

10|20|16   |     |   (0) comments

As the rate of change and complexity increases in agile networks, the importance of introducing DevOps methodologies for integrating active test and assurance solutions throughout the full service lifecycle becomes critical to ensure that customers are experiencing the service quality they demand. The industry landscape is changing, and software-based test and ...
Telecom Innovators Video Showcase
A10 Networks on Service Providers' Industry Needs

10|20|16   |     |   (0) comments

Light Reading's Steve Saunders hears how A10 enables service providers to accelerate, secure and optimize their application delivery to drive down costs, enhance service availability, and better respond to customer requirements, so they can improve customer satisfaction, monetize their network, and grow revenues.
LRTV Custom TV
New NFV Use Cases for Cable TV

10|19|16   |     |   (0) comments

A large number of NFV use cases are focused on the enterprise domain, looking at virtualization of customer-premises equipment (CPE). To date, there has been little focus on the use cases and business case for virtualization of the video content delivery networks required to deliver unicast and streaming video to consumers. Amdocs commissioned Analysys Mason to ...
Women in Comms Introduction Videos
Meet the Future Workforce: New Faces, Expectations & Motivations

10|19|16   |   5:33   |   (1) comment

Millennials and their younger peers, Gen Z, expect more out of their network and more out of their work. Intel's Lynn Comp shares how the industry can prepare for this new generation of workers.
LRTV Custom TV
ZTE Global Services User Congress 2016 Highlights

10|19|16   |     |   (0) comments

ZTE held its 2nd Global Service User Conference in Dusseldorf on October 13-14. Representatives from network operators, leading industry analysts and ZTE senior expertsattended the event, exploring the best practice in managed services and the vision to transform network operations into the operations center of the future (OpCF) in the software-defined networking ...
LRTV Custom TV
Cliff Grossner on Cloud & Network Synergy From Carrier Service

10|18|16   |     |   (0) comments

Local carriers offer the collaborated cloud and network service that benefits from their understanding of the regulations operating in different vertical markets.
In this interview, Cliff Grossner from IHS Technology talks about how this advanced service can support business agility and flexibility.
LRTV Custom TV
VeEX: Live from SCTE Cable-Tec Expo 2016

10|17|16   |     |   (0) comments

Cyrille Morelle, VeEX's President and CEO, talks with Light Reading's Alan Breznick live from the SCTE Cable-Tec Expo 2016. They discuss DOCSIS 3.1 technology, deployments and early lessons learned. New products on display include the CX350s-D3.1, CX380s-D3.1, CX310, AT2500-3G, FX150 OTDR and MTT WiFI Air Expert.
LRTV Custom TV
Smith Micro's Carrier-Grade WiFi Component

10|17|16   |     |   (0) comments

Join Carol Wilson of Light Reading as she interviews the CTO of Smith Micro, Dave Sperling.
Upcoming Live Events
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Hot Topics
Verizon Wants More Data on Yahoo Breach
Alan Breznick, Cable/Video Practice Leader, Light Reading, 10/20/2016
Attacks Have Major Internet Sites on the Ropes
Brian Santo, Senior editor, Test & Measurement / Components, Light Reading, 10/21/2016
WiCipedia: Grace Hopper Promotes Diversity, Girl Scouts Code & How to Thrive
Eryn Leavens, Special Features & Copy Editor, 10/21/2016
US Issues Total Flight Ban on Samsung Note 7
Dan Jones, Mobile Editor, 10/15/2016
Oh Snap! Qualcomm Unveils X50, Its First 5G Modem
Dan Jones, Mobile Editor, 10/17/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
Animals with Phones
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.