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Adtran to Buy NSN's Broadband Unit

Ray Le Maistre
12/12/2011
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Nokia Networks is to offload its fixed-broadband access business to Adtran Inc. (Nasdaq: ADTN) for an undisclosed sum as part of its recently announced restructuring strategy. (See Adtran to Buy NSN Broadband Biz.)

The move will give Adtran a greater international presence and boost its revenues by approximately 20 percent (more on that figure later). For NSN the deal is the next step in its planned metamorphosis into a profitable entity.

NSN is aiming to sell or mothball non-strategic business lines as it focuses on its mobile broadband, global services and customer experience management (CEM) operations. It has already agreed the sale of its microwave backhaul and WiMax business lines and now it's the turn of its GPON and DSL operations. (See NSN to Cut 17,000 Staff, NSN Unveils Its Kill List , NSN to Sell WiMax Biz , Analysts: NSN Focus Makes Sense, NSN Hangs Its Future on the Liquid Net and DragonWave to Buy NSN Unit.)

But given that NSN halted its GPON developments some years back and is not a leading player in the DSL access equipment market, what exactly is Adtran getting in this deal? (See 'Run Away!' Nokia Siemens Retreats From GPON and Nokia Siemens Dumps on GPON.)

Well, NSN does still have some legacy fixed-broadband product lines and some GPON OEM relationships that will transfer to Adtran when the acquisition closes (expected in April 2012). NSN says it has about 60 customers for these products. (See NSN Wins GPON Deal in Bulgaria , Bezeq Uses NSN for VDSL and BSNL Uses NSN for DSL.)

The products are: the hiX56xx IP DSLAM and hiX5300 ATM DSLAM (from the Siemens Communications side of the joint venture); D500 DSLAM (from the Nokia stable); the ACI element management system; and the hiX57xx GPON line courtesy of OEM relationships with NSN's Asia/Pacific partners, South Korean vendor DASAN Zhone Solutions Inc. and Chinese technology firm Cambridge Industries Group Ltd.

Adtran will also take on about 400 staff from NSN when the deal is completed, the majority of which are in Germany, with the rest spread around the 26 countries where NSN's fixed-broadband customers are located, says Adtran's VP of global marketing Gary Bolton. Most of those staff are involved in R&D, sales and associated customer support services.

International reach for Adtran
Adtran's Bolton says there's no overlap in terms of customers, which are based in Europe (including Russia), the Middle East, Africa and Asia/Pacific (including India) and that the existing business and opportunities to upsell Adtran's portfolio of equipment into NSN's fixed-broadband customer base will "accelerate our global expansion plans." The NSN assets are "extremely synergistic," says Bolton, who notes that Adtran's Carrier Ethernet developments will fit neatly with the business it is buying. In addition there are some areas where the R&D teams will be able to pool their resources, including the advancement of DSL vectoring capabilities. (See BBWF 2010: NSN Takes DSL to 825 Mbit/s and Adtran Preps Its Next FTTH Move.)

Bolton adds that the recent acquisition of wireless LAN specialist Bluesocket Inc. is also part of that international expansion strategy. (See Adtran Buys Bluesocket and Adtran Upgrades Bluesocket.)

The Adtran man says financial details, including the proposed purchase price, can't be discussed at this point, but in a filing with the Securities and Exchange Commission (SEC) early today the company revealed that it expects revenues from the NSN business to total about US$140-180 million during the first year of ownership (depending on exchange rates). It also expects that Adtran's earnings will not be affected during the first year but that the NSN business will increase its earnings ("be accretive") thereafter.

On average, financial analysts expect Adtran to generate revenues of approximately $790 million in 2012 (without accounting for the NSN deal). A quick calculation on the back of an envelope shows that Adtran, therefore, expects its revenues to be boosted by about 20 percent as a result of the acquisition.

— Ray Le Maistre, International Managing Editor, Light Reading

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digits
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digits,
User Rank: Light Beer
12/5/2012 | 4:46:47 PM
re: Adtran to Buy NSN's Broadband Unit


Initial reaction from Adtran's investors has not been positive.... the vendor's share price is down by more than 3.5% to $31.04 in early trading Monday morning. 

digits
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digits,
User Rank: Light Beer
12/5/2012 | 4:46:46 PM
re: Adtran to Buy NSN's Broadband Unit


The assets being sold are only the ones stated in the article.


Carrier Ethernet (the former Atrica product line) is still up for grabs, while NSN's next gen optical access (WDM PON) developments are being retained by NSN to support next gen mobile broadband rollouts.

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:46:46 PM
re: Adtran to Buy NSN's Broadband Unit


Ray,


That's pretty typical.  I would say the biggest concern is that Adtran has never bought anything near this scope and has little management experience in integration.


seven


 

optiwizard
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optiwizard,
User Rank: Light Beer
12/5/2012 | 4:46:46 PM
re: Adtran to Buy NSN's Broadband Unit


Is the former ATRICA Carrier Ethernet portfolio also going to ADTRAN ?


I assume not, as ADTRAN has already its own stuff and the ATRICA acquisition was a nightmare for NSN anyhow, it never started to fly and they paid probably too much money for it a few years ago.

digits
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50%
digits,
User Rank: Light Beer
12/5/2012 | 4:46:45 PM
re: Adtran to Buy NSN's Broadband Unit


A fair point well made!


let's see what happens following the management conference call in a few hours' time...

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