Ericsson gets Marconi's telecom assets

October 25, 2005 Stockholm, Sweden -- Ericsson today announced that it has reached an agreement to acquire the most significant parts of Marconi's telecommunications business.

According to Ericsson, the acquired assets represent about 75% of Marconi's turnover, including that company's businesses for optical networking, broadband and fixed radio access networks, softswitches, and data networking equipment and services. Ericsson also acquires Marconi's relevant telecommunications services activities, as well as the Marconi trademark, associated brand names, and IPR.

According to a press release, Ericsson will pay approximately SEK 16.8B (GBP 1.2B) to Marconi in cash on completion of the acquisition, subject to certain closing adjustments. The acquisition is expected to add roughly SEK 14.0B (GBP 1.0B) to Ericsson's sales, and is expected to have a neutral effect on the company's EPS in 2006, with positive contribution from 2007. The company says it believes that operating margins in line with its corporate average can be achieved in the acquired businesses over time.

The businesses to be acquired had net tangible assets of approximately SEK 1.4B (GBP 0.1B) as of September 30, 2005. The acquisition cost for Ericsson will be allocated mainly to intellectual property rights (brands, trade marks, patents etc.), which are expected to be tax deductible for Ericsson. Marconi's London headquarters and certain of its businesses in the UK and Germany are not part of the acquisition, nor is Marconi's UK pension plan.

"Ericsson and Marconi know each other well and have had a successful partnership for over ten years. Both companies have a rich history of innovation that has brought many of the technologies to market that are commonplace in our lives today," remarks Carl-Henric Svanberg, president and CEO of Ericsson. "We look forward to welcoming so many of Marconi's talented employees to Ericsson."

After the acquisition, Marconi will be renamed telent plc, and will focus its business on providing services to telecommunications and enterprise customers; Ericsson says the new company will be its preferred services partner in the UK.

The acquisition requires approval from Marconi's shareholders and clearance from the relevant competition and other regulatory authorities, including the European Commission. Marconi is proposing to return a significant amount of the available proceeds from the transaction to its shareholders.

According to the release, the Board of Marconi intends to recommend that Marconi shareholders vote in favor of the transaction at an extraordinary general meeting, which will take place on or about December 21, 2005. Subject to receipt of the necessary approvals, the transaction is expected to be completed by the end of the year.

Enskilda Securities is acting as financial advisor to Ericsson. Morgan Stanley & Co. Limited, Lazard & Co. Limited, and JPMorgan Cazenove Limited are acting as financial advisors to Marconi.