Alcatel-Lucent confirms plans to purchase Nortel's WCDMA business

Stuart Corner
Tuesday, 05 December 2006 16:24

IT Industry - Deals

Alcatel-Lucent has signed an agreement to acquire Nortel's UMTS radio access business (UTRAN) and related assets for $US320, confirming an MoU for the deal signed by Alcatel and Nortel on September 1, 2006.

The deal will give will Alcatel-Lucent an additional sixteen UMTS customers around the world. Approximately 1,700 people will join Alcatel-Lucent, of which about 1,100 are R&D engineers, based mainly in France, Canada and China.

When the deal was announced in September  Alcatel said that the acquisition and its merger with Lucent would create the only global player with wireless technologies "addressing any spectrum that customers may own, any evolutionary path to 4G from any technology; a strong presence in leading 3G markets worldwide; and the WiMAX building blocks to smooth the path to 3G long term evolution (LTE) and CDMA2000 1x EV-DO Rev C."

There seemed to be a consensus among analysts at the time that Alcatel had scored a bargain. Although neither side disclosed any details about the financials of the business, Light Reading reported several analysts valuing it at up to $US500 million.

Nortel CEO Mike Zafirovski said the business generated less than 10 percent of Nortel's total sales, which would put a $US1 billion ceiling on its revenues. The market seemed to believe the deal would be a good one for Nortel: its share price rose one percent in the wake of the announcement.

Nortel claimed the deal would "enable Nortel to simplify its business and strategically focus its investments for leadership in key markets while ensuring its customers' UMTS access requirements will continue to be met." According to Zafirovski: "Nortel is sharpening its focus on the markets in which we intend to lead. Our UMTS access business lacks the scale and momentum needed to become profitable."