& cplSiteName &

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        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.
NEXT COURSE
Friday, September 30, 1:00PM EDT
Gigabit & the Great Migration
Robert Howald, Vice President, Network Architecture, Comcast
UPCOMING COURSE SCHEDULE
Wednesday, October 5, 1:00PM EDT
Gigabit & Smart Cities
Joe Kochan, COO & Co-Founder, US Ignite
Friday, October 7, 1:00PM EDT
Gigabit & DOCSIS 3.1
Ty Pearman, Director, Access Architecture, Comcast
Wednesday, October 19, 1:00PM EDT
Securing a Virtual World
Rita Marty, Executive Director, Mobility and Cloud Security, Chief Security Office, AT&T
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
Flexible Deployment Approaches for the Gigabit Services Evolution

9|29|16   |     |   (0) comments


For many operators, the gigabit evolution begins with the shift from DOCSIS 3.0 to DOCSIS 3.1. But that move represents a change not only in the protocol itself, but in the approach to architecting their entire DOCSIS delivery chain -- from the headend to the outside plant and home gateway components.

Jonathan Ruff, senior director of global technical ...

LRTV Interviews
Level 3 VP: Enterprises Need More for Less

9|29|16   |   05:27   |   (0) comments


Andrew Dugan, Level 3 group vice president of global technology and IT, says enterprises need more bandwidth and they need it faster and with greater security, but they want to spend less, if possible. They are looking to carriers to reduce their network complexity and help protect them from cyberattacks as well.
LRTV Interviews
CenturyLink: SDN/NFV Pose New Interconnection Possibilities

9|28|16   |   04:37   |   (0) comments


Network operators should develop new APIs and business processes for reselling virtual assets to each other, says CenturyLink's Bill Walker. That will enable them to build digital business portfolios that help them avoid becoming commodity transport providers.
LRTV Interviews
Level 3: Overcoming Terror of Being Supplier, Integrator & Developer

9|28|16   |     |   (0) comments


At Light Reading's NFV & Carrier SDN event in Denver, Travis Ewert of Level 3 Communications said there is terror in becoming supplier, integrator and developer, but it can be overcome and be cost effective.
LRTV Custom TV
Introducing IoT World News

9|27|16   |   01:43   |   (0) comments


Self-driving cars, medical sensors, smart cities... and refrigerators. In order to address the huge scope of IoT, KNect365 has created a unique online community that will help businesses to understand and monetize the opportunities that live within the IoT market. We look forward to welcoming you to IoT World News -- your gateway to a better connected future.
LRTV Interviews
AT&T: Reusable Functions Next NFV Key

9|27|16   |   06:03   |   (0) comments


The next generation of NFV has to break functions down into reusable software chunks, making everything much more cloud-like.
LRTV Interviews
Masergy on Security: Attackers Gaining Upper Hand

9|27|16   |   5:10   |   (2) comments


At Light Reading's NFV & Carrier SDN event in Denver, Ray Watson, vice president of Global Technology at Masergy, says that because of the growth in virtualization, the threat landscape is shifting in favor of the attackers. As a result, service providers need to think beyond just defending the perimeter and take a more holistic approach to security.
LRTV Interviews
Verizon Takes Next Step on Biz Virtualization Journey

9|26|16   |   4:38   |   (2) comments


At September's NFV & Carrier SDN event in Denver, Light Reading sat down with Victoria Lonker, director of Product and New Business Innovation at Verizon, to chat about where the carrier is with delivering virtualized services to business customers.
LRTV Interviews
Global Services: The $40B Face-Off

9|26|16   |   05:53   |   (1) comment


More service providers than ever before are battling it out to win a slice of what is now a $40 billion global communications services pie, explains Ovum Principal Analyst David Molony.
LRTV Documentaries
MEC Congress: The Key Takeaways

9|22|16   |   03:25   |   (3) comments


Three key takeaways from the Mobile Edge Computing (MEC) Congress in Munich, Germany.
Wagner’s Ring
Time to Shut Up About 'Dumb Pipes'

9|22|16   |     |   (19) comments


Service providers can't compete with OTT players. It just isn't in their DNA. Instead, service providers need to embrace what they're good at -- providing reliable, secure connectivity.
Wagner’s Ring
Keeping Your Tech Career Going After 50

9|21|16   |     |   (13) comments


How do you keep your career moving forward when you're past the half-century mark?
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
Infographics
Hot Topics
WiCipedia: The Women Helping Women Edition
Eryn Leavens, Special Features & Copy Editor, 9/23/2016
Eurobites: Telefónica Taps Juniper for Network Security
Paul Rainford, Assistant Editor, Europe, 9/26/2016
Open Source Getting on My Nerves
Carol Wilson, Editor-at-large, 9/26/2016
Powell Kills the Cable Show
Mari Silbey, Senior Editor, Cable/Video, 9/29/2016
Telstra Sees Quadrupled Data Capacity by 2020
Carol Wilson, Editor-at-large, 9/28/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
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.
Animals with Phones
There's Nothing Like Missing a Full Minute of Pokémon Go Click Here
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.