Swedish firm Ericsson is to buy Nortel’s majority stake in LG-Nortel, which is a joint venture between LG Electronics and Nortel Networks, for US$242m.
Ericsson, the world’s largest mobile network equipment maker, said the acquisition would significantly expand its footprint in the Korean market and provide it with a well-established sales channel and strong R&D capability in the country.
The firm also said taking on Nortel’s controlling stake in LG-Nortel would provide it with an industrial base in Korea and the ability to build new customer relationships.
US firm Nortel filed for bankruptcy protection in January and had been seeking a buyer for its stake in LG-Nortel.
Ericsson said the transaction is expected to have a positive effect on its earnings within a year after closing.
The joint venture, which includes important contracts with Korean operators such as KT, LG Telecom and SK Telecom, will be renamed LG-Ericsson.
Korea a key telecoms market
“Korea is one of the largest telecom markets with advanced end-user demand of new services. 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,” said Hans Vestberg, president and CEO of Ericsson.
“LGE is pleased to have Ericsson as a new partner in this joint venture," said Yong Nam, vice-chairman and CEO of LG Electronics. "Ericsson will provide global industry experience and technical expertise that will benefit both customers and employees. We look forward to a fruitful future collaboration.”
“LG-Ericsson is expected to provide the Korean market with leading technology and customer supports in co-operation with Ericsson’s Global Leadership in Telecommunication market. We are excited by the new perspective for our company." said Jae Ryung Lee, CEO of LG-Nortel.
The joint LG-Nortel venture was established in 2005 through the contribution by LG Electronics of its telecommunications systems business and by Nortel of its Korean distribution business.
In 2009, LG-Nortel generated about US$650m of sales and had 1,300 employees.
Photo: Hans Vestberg, president and CEO of Ericsson
Article courtesy of Businessandleadership.com