Ericsson Wins Bid For Nortel GSM Business

The firesale continues at Nortel Networks, after Telefon AB LM Ericsson and Kapsch CarrierCom AG jointly won the bidding for its GSM/GSM-R business.

The two companies offered $103 million ($62 million) for the division, which according to Nortel officials, 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 in early 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 (£678 million). Other vendors, such as Avaya and Nokia Siemens Networks, also have bought parts of the insolvent company.

Most recently, Nortel announced that Ciena bought its optical networking and carrier Ethernet businesses for $530 million (£318 million).

Nortel’s goal is to ultimately sell off all of its business units, according to a spokesman.