Light Reading
Swedish vendor makes the case for spending $1.13 billion on Nortel's wireless assets

Ericsson: Why We Want Nortel's Wireless

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan
7/27/2009
50%
50%

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
Flash Poll
LRTV Huawei Video Resource Center
Sales Director of INIT on Plug & Play Switch Devices

9|19|14   |   3:21   |   (0) comments


INIT Italy uses both the Huawei S5700 and S7700 series switches for the campus LAN environment. Sales Director Andrea Curti says their company chose these Huawei devices over others because of their performance, flexible scalability and plug-and-play features.
LRTV Huawei Video Resource Center
Saudi Arabia Upgrades Vocational Training System

9|19|14   |   3:31   |   (0) comments


The Technical and Vocational Training Corporation (TVTC) has 100,000 students, 150 government-owned institutions and oversees 1000 private institutes. The CIO of TVTC explains that Huawei devices have allowed them to manage multiple datacenters using just one software program, scientifically tracking the progress of students and teachers, saving them millions.
LRTV Huawei Video Resource Center
Huawei's Media Solutions Are Here to Stay

9|19|14   |   4:35   |   (0) comments


The current media revolution requires rapid upgrades in technology. New formats (HD, 3D, 4K etc.) and the subsequent explosion of file sizes demand sophisticated network and storage architecture. Social media and the multiple distribution channels require a robust asset management system. Gartner analyst Venecia Liu speaks about the current technological trends in ...
LRTV Huawei Video Resource Center
Microgenesis on Huawei's Switches

9|19|14   |   3:57   |   (0) comments


Microgenesis is a solutions and system integrator company in the Philippines whose areas of expertise include data centers, networking and security products. In this video, Executive Director Jeffrey Choa talks to us about his customers needs and they benefit from using Huawei switches.
LRTV Huawei Video Resource Center
Network Solutions Help the Philippines Jump Ahead

9|17|14   |   2:59   |   (0) comments


In the past, the Philippines has under-invested in technology. Now, the CEO of Softshell talks about how Huawei products help the Philippines jump ahead as the economy improves.
LRTV Huawei Video Resource Center
VCS Observation for Safer Cities in the Netherlands

9|17|14   |   5:20   |   (0) comments


Holland's VCS Observation has been operating for 22 years. Its main goal is to get cities safer. CEO Wim van Deijzen tells us some of the challenges his company faces and how Huawei is helping to overcome these challenges.
LRTV Huawei Video Resource Center
A Conversation With Serbia's Ministry of Interior

9|17|14   |   4:38   |   (0) comments


At HCC 2014, the Assistant Minister of the Ministry of Interior of the Republic of Serbia talks to us about his projects and corporation with Huawei. Solutions like Safe City and E-Government and services like cloud computing are just some of the areas his department is interested in.
LRTV Huawei Video Resource Center
IHS Analyst Discusses eLTE at CCW 2014

9|10|14   |   7:09   |   (0) comments


Thomas Lynch, associate director of critical communications at IHS Technology, talks about broadband in critical communications.
LRTV Huawei Video Resource Center
TCAA on Huawei eLTE: A Broadband Solution for Mission-Critical Communications

9|10|14   |   2:29   |   (0) comments


At CCW2014 in Singapore, the TCCA's Phil Kidner talks about the importance of broadband data for critical communications.
LRTV Custom TV
Spotlight on Cisco: SDN for Optical Networks

9|8|14   |   9:27   |   (0) comments


Cisco's Greg Nehib talks OpenFlow and more on the 'Software-Defined Networking for Optical Networks' panel at the Big Telecom Event in June 2014.
LRTV Custom TV
Cisco's Evolved Programmable Network (EPN)

9|8|14   |   4:05   |   (0) comments


A look at the various demos Cisco showed at Light Reading's Big Telecom Event highlighting Cisco's EPN innovation and how SDN and NFV technologies are enabling a variety of new services.
LRTV Huawei Video Resource Center
The Future of Ultra-Broadband, With Kevin Kelly (UBBF2014)

9|5|14   |   1:13   |   (1) comment


If you think the technological changes we've seen up to now are astounding, just wait until you see what the future has in store. Discuss upcoming breakthroughs with Kevin Kelly, Founding Executive Editor of Wired Magazine, at the Huawei Ultra-Broadband Forum on September 24.
Upcoming Live Events!!
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Today's Cartoon
Vacation Special Caption Competition Click Here
Latest Comment
Hot Topics
Glimpsing the Self-Driving Car
Dan Jones, Mobile Editor, 9/12/2014
AT&T to Launch WiFi Calling in 2015
Sarah Reedy, Senior Editor, 9/12/2014
AT&T: We'll Bundle Fixed Wireless & DirecTV
Mari Silbey, Independent Technology Editor, 9/15/2014
New NFV Forum Focused on Interoperability
Carol Wilson, Editor-at-large, 9/16/2014
NFV & The Data Center: Top 10 Takeaways
Sarah Reedy, Senior Editor, 9/18/2014
Like Us on Facebook
Twitter Feed