Alcatel signals intent with acquisition of Nortel UMTS

US$320m buy catapults firm into top three

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By  Published  September 8, 2006

Communications supplier Alcatel is buying Nortel’s universal mobile telecommunications system (UMTS) radio access business for US$320million in a bid to strengthen its position in the UMTS market and expand its global leadership in broadband access.

The deal will make Alcatel one of the world’s largest suppliers of UMTS radio access solutions behind market leaders Ericsson and Nokia Siemens Networks.

“The expertise of Nortel’s UMTS team is well-known. I am confident that the scale resulting from our combined forces (including those of Lucent, pending the conclusion of the merger) will pave the way for further success in the wireless market. We are clearly poised to become a strong number three in UMTS and HSxPA,” said Marc Rouanne, president of Mobile Communications at Alcatel.

“Combined with our strong GSM/Edge position, our early leadership in WiMax and our strong commitment to LTE, this acquisition will add further momentum to Alcatel’s broadband wireless access strategy,” he continued.

Nortel was selling the UMTS unit as it did not see that market area as one it can compete effectively in, Mike Zafirovski, claimed last month. “We did not see a way to have any reasonable returns on UMTS on a short-term basis and saw Alcatel’s prospects for this market as much better,” he said.

Instead, Nortel will focus on other technologies, such as WiMax.

Through the transaction, Alcatel will gain an additional 14 UMTS customers around the world. It will also enhance its presence with Tier-1 operators, particularly in leading 3G markets such as South Korea, Italy, Spain, France and the UK.

In addition, the purchase will enable Alcatel to strengthen its ability to serve key upcoming 3G markets, such as China, where it already has a foothold in the GSM and Edge market.

Under the terms of the deal, Alcatel will acquire Nortel’s UMTS radio access technology and product portfolio, associated patents and tangible assets as well as customer contracts.

A majority of employees from Nortel’s UMTS access business will be transferred to Alcatel, the companies said.

“The deal will be a win-win for both companies and our customers,” Richard Lowe, president of Mobility and Converged Core Networks, Nortel, commented.

The acquisition, which is subject to a definitive agreement, is expected to be completed by the fourth quarter of 2006.

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