INTERVIEW: Nortel Deal Boosts Ericsson's US Position - CFO
July 27 2009 - 10:05AM
Dow Jones News
L.M. Ericsson Telephone Co.'s (ERIC) acquisition of part of
Nortel Network Corp.'s (NRTLQ) assets will give the Swedish
equipment vendor a strong position on the fast-growing North
American telecommunications market, Chief Financial Officer Hans
Vestberg told Dow Jones Newswires Monday.
Ericsson late Friday agreed to acquire Toronto-based Nortel's
CDMA and LTE assets for $1.13 billion, beating a previous $650
million bid from rival Nokia Siemens Networks (NOK, SI).
The deal further increases Ericsson's presence in the U.S. after
the company earlier July signed a seven-year deal to run the
networks of Sprint Nextel Corp. (S).
"We will gain access to a customer base in the U.S. within CDMA,
which is very important," said Vestberg, who in January will take
over as chief executive of Ericsson.
Ericsson will take over a number of CDMA contracts through the
Nortel acquisition, with North American operators including
Verizon, Sprint and Leap. Vestberg said the operators will
eventually roll out networks based on Long Term Evolution, a new
high-speed technology, and added that his company will have a good
chance to gain LTE equipment orders from them after building a
relationship within CDMA.
Although the Code Division Multiple Access, or CDMA, technology
is about to be phased out in North America, Vestberg said there
will be demand for CDMA infrastructure for a few more years, and
for network maintenance many years thereafter, so that the CDMA
contracts will be profitable in their own right.
The acquisition will improve Ericsson's market share in the
U.S., Vestberg said, but added that the company will still face
competition from rivals such as Alcatel-Lucent (ALU), which has a
strong CDMA business.
At 1313 GMT, shares in Ericsson were down 1.8% at SEK70.20,
against a 1.4% drop in the wider market in Stockholm.
Company Web site: http://www.ericsson.com
-By Gustav Sandstrom, Dow Jones Newswires; +46-8-5451-3099;
gustav.sandstrom@dowjones.com