Telefonaktiebolaget LM Ericsson has completed the final step in acquiring Nortel Networks Corp.’s carrier wireless assets for US$1.13 billion and has hired more workers than it originally promised to in Canada.
The Swedish telecom equipment manufacturer announced Friday the transaction, which will give Ericsson Nortel’s Code Division Multiple Access (CDMA) cellular base station business in North America and Long Term Evolution (LTE) wireless technology, has closed.
As of Friday, about 900 Nortel workers are joining Ericsson Canada. About 1,600 additional Nortel employees are now working for Ericsson in the U.S.
The deal resulted from Ericsson winning an auction last summer, which prompted a backlash from politicians – including Ontario Liberal Finance Minister Dwight Duncan – who claimed Ericsson would move jobs offshore. It was also opposed by BlackBerry maker Research in Motion Inc., which earlier wanted to buy Nortel’s Long Term Evolution (LTE) wireless patents.
The other two bidders were Nokia Siemens Networks (NSN) and MatlinPatterson, a New York buyer of distressed companies. No Canadian firms placed bids.
Toronto-based Nortel, which has lost money nearly every year since 1998,filed for protection from creditors in Canadian and foreign bankruptcy courts last January. In June Nortel said it plans to sell “substantially all” its business assets, after NSN offered to buy the assets that are now in Ericsson’s hands for US$650 million.
Ericsson already has a research centre in Montreal, which includes a customer support centre for customers worldwide. With the Nortel buy, Ericsson will inherit contracts with Telus Corp., BCE Inc., Verizon Communications Inc., Sprint Nextel Corp., United States Cellular Corp. and Leap Wireless International Inc.
During testimony before the House of Commons Standing Committee on Industry, Science and Technology in August, Ericsson Canada president Mark Henderson said his firm has 1,900 employees in Canada, including 1,500 in Montreal.
At the time, it planned to offer jobs to 800 Nortel employees in Canada, about 550 of whom would work in Ottawa, Henderson testified in August in reply to a question from committee member Robert Bouchard, the Bloc Quebecois member of parliament for the riding of Chicoutimi-Le Fjord.
But an Ericsson spokesperson said in an interview Friday the company offered jobs to more than 900 Nortel workers, about 800 of whom still stay in Ottawa.
Henderson said Friday about 98 per cent of Nortel employees who were offered jobs are now Ericsson Canada employees.
Ericsson’s customers include Bell Canada Enterprises (BCE) Inc., Rogers Communications Inc. and Data & Audio-Visual Enterprises (DAVE) Wireless, a wireless carrier part-owned by John Bitove that acquired spectrum in 2008 but has yet to launch service. Ericsson, which has been operating in Canada since 1953, built Rogers’ first cellular network in 1984.
Ericsson is retaining Richard Lowe, president of Nortel’s carrier unit, as head of Ericsson’s CDMA unit in North America.
Ericsson also has a research centre in Vancouver that focuses on routing.
During his testimony in before the industry committee, Henderson said Ericsson would not combine its Ottawa and Montreal operations.
“We will have rather large facilities in Ottawa now,” Henderson said in an interview Friday. “In Toronto next week we will have Nortel employees moving into some of our premises.”
Last summer’s House of Commons hearings were prompted by complaints from RIM that it was effectively shut out of the bidding process. Mike Lazaridis, co-chief executive officer of RIM, said at the time RIM had been talking to Nortel about buying its patents for Long Term Evolution (LTE) wireless. He also claimed if Ericsson gets the patents it could cause a national security problem. His claim was dismissed by Canadian analysts.
Although Ericsson develops LTE, the Nortel asset sale does not include Nortel’s LTE intellectual property. Instead, Ericsson will get a non-exclusive licensing agreement to use those patents.
Despite the large US$1.13 billion price tag, Industry Minister Tony Clement announced in September the Ericsson sale is not subject to review under the Investment Canada Act.
However, the government is reviewing the sale of Nortel’s enterprise business to Avaya Inc.
Basking Ridge, N.J.-based Avaya won an auction when it offered to pay US$915 million for the Nortel operations that make switches, routers, private branch exchanges, IP phones, firewalls, unified communications and other voice and data networking products for corporate and government networks.
The third major operation Nortel is selling is its optical networking and metro Ethernet business, which Ciena Corp. offered to acquire last month.
Once that’s gone, Nortel will have few assets left of what was once a multi-billion dollar, multinational telecommunications manufacturer, founded in 1895 as Bell Canada’s manufacturing unit.
But there is a possibility Nortel will remain as a small patent licensing firm, company officials testified before the Commons industry committee in August.
