Nortel and LG in telecoms joint venture

17 Aug 2005

Nortel and LG Electronics have formed a joint venture that will offer telecom and networking solutions in the wirelines, optical, wireless and enterprise segments.

The LG-Nortel joint venture will support the strategies of both companies for ongoing development of leading-edge wireline, optical, wireless and enterprise communications and networking solutions to ignite and power global commerce. It will also reflect the companies’ commitment to leveraging best-in-class resources and expertise by joining forces with leading players in key markets.

The agreement was signed in Seoul, South Korea by SS Kim, chief executive officer and vice-chairman of LG Electronics, and Bill Owens, vice-chairman and chief executive officer of Nortel. The joint venture will be tentatively named LG-Nortel. This entity will combine the telecommunication infrastructure business of LG Electronics and the distribution and service business of Nortel in South Korea.

Nortel will own 50pc plus one share in the joint venture, in exchange for which Nortel will contribute its South Korean distribution and services business and pay US$145m and other non-monetary consideration. Separately, LG Electronics may be entitled to payments over a two-year period based on achievement by the joint venture of certain business goals.

LG Electronics and Nortel will nominate certain key executives to the management team of the joint venture.

“Today is another milestone for Nortel as we continue to demonstrate our commitment to open up the Asia region with a best-in-class technology leader,” Nortel CEO Paul Owens said.

“South Korea leads the world in embracing technology that enhances the human experience. Our relationship with LG better positions Nortel in the dynamic and growing Asia market, it will expedite research and development (R&D) and it will benefit our global customers. Nortel is clearly playing to win.”

Closing of the transaction is subject to satisfaction of certain conditions, including regulatory and other approvals, and is anticipated by year end. JP Morgan advised Nortel and Lehman Brothers and Woori Securities advised LG Electronics in this transaction. Nortel operates an R&D facility in Galway and multifunctional facility in Belfast.

By John Kennedy