ERICSSON TO BUY NORTEL'S STAKE IN VENTURE WITH LG
Ericsson AB, the world's largest maker of wireless networks, agreed to buy Nortel Networks Corporation's stake in its South Korean venture with LG Electronics Incorporated for $242m in cash.
Bloomberg reported on Wednesday, that Ericsson planned to buy a controlling 50 per cent-plus-one- share stake in LG-Nortel from Nortel, Stockholm-based Ericsson and Toronto-based Nortel said in separate statements.
'Ericsson has not managed to enter the Korean networks market before, and now it will get ongoing contracts and customer relationships,' said Haakan Wranne, an analyst with Swedbank Markets in Stockholm. 'The price is what we could expect. It's another piece of the puzzle to increase their Asian footprint.' He rates Ericsson 'reduce.'
Nortel, once North America's biggest maker of telecommunications equipment, had been auctioning its assets since filing for bankruptcy protection in Canada and the United States in January 2009. Ericsson last year bought, Nortel's wireless equipment business making systems based on the code-division multiple access wireless standard, or CDMA, which is used mainly in the US, China, Japan and Korea.
Ericsson rose as much as 3 kronor, or 3.7 per cent, to 82.40 kronor, and traded at 81.80 kronor in Stockholm. LG Electronics, the world's third-largest maker of mobile-phone, gained 1.2 per cent to close at 123,500 won on the Korea Exchange, while the benchmark Kospi index climbed 1.7 per cent.
'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,' the Ericsson Chief Executive, Mr. Hans Vestberg, said in the statement.
Long-term evolution, or LTE, is a technology that offers wireless broadband speeds comparable to fast landlines. It's initially aimed at computer users with wireless dongles. The Nortel unit Ericsson bought last year included LTE gear and development teams.
Ericsson in July agreed to cooperate with the South Korean government on a 'green ecosystem' based on so-called fourth- generation wireless technology.
'The transaction is expected to have a positive effect on Ericsson's earnings within a year after closing,' which is subject to regulatory approval, the company said in the statement. SEB Enskilda advised Ericsson on the transaction.