Bankrupt Nortel Continues Business Break-Up

Days after announcing the sale of its optical networking and carrier Ethernet units, officials with bankrupt Nortel Networks are saying that another piece of their business is being sold.

Nortel announced Nov. 25 that it is selling its GSM/GSM-R business to Telefon AB L.M. Ericsson and Kapsch CarrierCom AG, who jointly won the bidding for the business with an offer of $103 million (£62m).

Nortel officials say their company is a top supplier of GSM networks. GSM (Global System for Mobile communications) is a widely popular wireless technology standard for mobile phones around the world. Based on the GSM technology, GSM-R (GSM for Railways) gives railway operators a secure communications system.

Nortel expects to close the deal in the first quarter of 2010. It still needs the approval of bankruptcy courts in the United States and Canada—Nortel will seek the approval at a joint hearing on 2 December—as well as in France.

Once the deal closes, Ericsson will own Nortel’s North American GSM business and Kapsch will own Nortel’s European and Taiwan GSM businesses. In addition, Kapsch also will own Nortel’s GSM-R business.

The GSM/GSM-R business is the latest in a number of businesses that Nortel has sold off since the beginning of 2009, when the company announced it was seeking Chapter 11 bankruptcy protection. Officials had said that the global recession derailed turnaround plans the company had put into place, and that after weighing restructuring ideas, they decided the best course of action was to sell off all of the businesses piecemeal.

Officials said it was the best way to ensure that Nortel technology continues to play a role in the communications industry, and that as many employees as possible keep jobs with the new owners.

In that sense, about 680 employees with Nortel’s GSM/GSM-R business will receive offers of employment from the joint bidders.

Ericsson already bought Nortel’s wireless equipment business in July for $1.13 billion. Other vendors, such as Avaya and Nokia Siemens Networks, also have bought parts of the insolvent company.

Most recently, Nortel announced Nov. 23 that Ciena bought its optical networking and carrier Ethernet businesses for $530 million.

Nortel’s goal is to ultimately sell off all of its business units, according to a spokesman. In June, while announcing that Nokia Siemens has put in a bid for Nortel’s CDMA business and LTE Access assets, Nortel President and CEO Mike Zafirovski outlined the company’s strategy.

“Maximising the value of our businesses in the face of a consolidating global market has been our most critical priority,” Zafirovski said in a statement. “We have determined the best way to do this is to find buyers for our businesses who can carry Nortel innovation forward, while preserving employment to the greatest extent possible. This will ensure Nortel’s strong assets—technologies, customer relationships, and employees—continue to play an important role in driving the future of communications.”