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Will Others Bid for Nortel's Wireless Assets?

Ray Le Maistre
6/23/2009
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Nokia Networks looks a pretty safe bet to conclude its $650 million deal to buy some of Nortel Networks Ltd. 's wireless assets. (See NSN Picks at Nortel's Mobile Bones and All the Latest Nortel & Nokia Siemens News & Analysis.)

But it's not a done deal because it's a so-called "Stalking Horse Sale Agreement." Under bankruptcy protection rules, there must now be an auction process that allows any other interested (and qualified) bidders to make a better offer for the assets within 30 days of the bankruptcy court hearing related to NSN's offer (due Monday, June 29).

NSN says it's not sure whether other bids will come forward, but a spokesman says the emergence of any counter offers wouldn't come as a great surprise.

So, will any rivals trump NSN's offer and kick-start a bidding war? And are there any gags to be had about stable doors being closed after a stalking horse has bolted?

It's an exciting prospect for onlookers, but unlikely to happen, according to the handful of industry executives and industry analysts contacted by Light Reading about the issue (and who requested anonymity).

Those contacted immediately ruled out Alcatel-Lucent (NYSE: ALU) -- anti-competition laws wouldn't allow the CDMA market leader to buy up the second-biggest CDMA player -- and Ericsson AB (Nasdaq: ERIC), which already has a position with Nortel's key CDMA customer, Verizon Wireless .

The only companies that would gain from Nortel's CDMA business and its LTE access assets would be the Chinese vendors Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), both of which would love to have Nortel's CDMA North American customer base.

But bids from these players are incredibly unlikely, according to our expert panel, as the chance of regulatory clearance, and a favorable nod from Verizon Wireless, would be negligible.

But are there any other names that could come out of left field? Motorola Inc. (NYSE: MOT) was mentioned as a company that, given other circumstances (mainly financial), might have considered a rival offer but is currently not seen as a serious threat.

There's also the currently problematic matter of financing such an acquisition. Nortel's CDMA business is on course to generate between $1.3 billion and $1.5 billion in revenues this year and still be profitable, while funding the purchase of LTE development assets, though they have some value, wouldn't be straightforward, as NSN appears to have discovered.

In fact, NSN executives noted on a conference call with the media on Monday that its $650 million bid was contingent on a $300 million credit facility from Canada's Export Development Canada (EDC) to support the acquisition.

— Ray Le Maistre, International News Editor, Light Reading

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