Ericsson buys Nortel's piece of LG-Nortel joint venture

APRIL 21, 2010 -- Ericsson has entered into a share purchase agreement to acquire Nortel's majority shareholding (50%+1 share) in LG-Nortel (search Lightwave for LG-Nortel), the joint venture of LG Electronics and Nortel Networks, $242 million on a cash and debt-free basis.

APRIL 21, 2010 -- Ericsson (NASDAQ:ERIC) has entered into a share purchase agreement to acquire Nortel's majority shareholding (50%+1 share) in LG-Nortel (search Lightwave for LG-Nortel), the joint venture of LG Electronics and Nortel Networks, $242 million on a cash and debt-free basis. The transaction is subject to customary regulatory approvals.

The joint venture was established in 2005 through the combination of LG Electronics' telecommunications systems business with Nortel's Korean distribution business. The enterprise has focused on development and marketing of large-scale telecommunications systems such as WCDMA, CDMA, and LTE for telecom service providers in Korea as well as enterprise products and services. It also has offered a WDM-PON product line internationally (see "LG-Nortel promises WDM-PON upgrade at BBWF").

In 2009, LG-Nortel generated approximately $650 million of sales and had 1,300 employees. The joint venture will now be called LG-Ericsson. The transaction is expected to have a positive effect on Ericsson's earnings within a year after closing.

Ericsson says the acquisition will expand the company’s footprint in the Korean market and provide Ericsson with a well-established sales channel and strong R&D capability in the country. The deal also will provide Ericsson with an industrial base and the ability to build new customer relationships.

The joint venture includes contracts with Korean operators such as KT, LG Telecom, and SK Telecom.

"Korea is one of the largest telecom markets with advanced end-user demand of new services. A strengthening of our position through the collaboration with our new partner LG Electronics will enhance our position for future technology shifts such as LTE," said Hans Vestberg, president and CEO of Ericsson.

"LGE is pleased to have Ericsson as a new partner in this joint venture," said Yong Nam, vice chairman and CEO of LG Electronics. "Ericsson will provide global industry experience and technical expertise that will benefit both customers and employees. We look forward to a fruitful future collaboration."

The joint venture will continue to be headquartered in Seoul.

This is Ericsson’s second purchase of Nortel assets. The Swedish company previously bought parts of the Carrier Networks division of Nortel relating to CDMA and LTE technology in North America.

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