Telecom Timeout

Jun 22 2009   3:18PM GMT

Nortel wireless fire sale delivers North American footprint to NSN

Kate Gerwig Kate Gerwig Profile: Kate Gerwig

Nortel’s wireless carrier network infrastructure division may bring in a paltry $650 million if the Nokia Siemens Networks (NSN) deal goes through. By all accounts, NSN — the joint venture of Nokia Corp and Siemens AG — will be getting a really good deal out of Nortel’s bankruptcy. The deal sets a low bar, according to The Wall Street Journal, which is pretty clear, considering Nortel was once valued at $250 billion.

NSN stands to gain Nortel’s CDMA and LTE assets. Nortel’s CDMA unit earned $700 million a year – and that was while it was in decline, according to WSJ. The big 4G LTE migration is supposed to start next year, and NSN is gathering firepower for that.

Why the excitement about CDMA as the hype builds about 4G LTE and WiMax? “The synergy for NSN is in the CDMA positioning that Nortel has and the presence in key accounts in North America where NSN has very little footprint,” CIMI Corp. President Tom Nolle told us.

Of major importance is Nortel’s long-term relationship with Verizon Wireless. In 2007, NSN won a contract award from Verizon Wireless for IMS, and the Nortel acquisition could only build on this relationship.

While Nortel accepted the NSN offer late last week, plenty of other players are interested in the Nortel wireless business, particularly Ericsson and Huawei, Nolle added. But will they intercept NSN’s bargain-basement win?

“It’s pretty likely that Nortel had discussions with both prior to “accepting” this bid. But the law requires that there be an auction here, and there is always a chance someone else will enter a higher bid than the current NSN offer. If that happens, though, I’d expect that NSN would just bid higher,” Nolle said.

All of this means that NSN could easily make its money back in a year, and is getting a wireless research organization in the bargain. As part of the deal, an estimated 2,500 Nortel employees could transfer to NSN, and about 400 of them conduct LTE research and development.

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