Huawei suit creates problems for Nokia Siemens Networks-Motorola deal

Nokia Siemens Networks attempts to buy Motorola’s networks business may be delayed even further as Huawei is suing the companies to alter the terms of their deal, claiming that Moto is essentially selling Huawei’s secrets to the European network vendor.

Huawei is trying to prevent Motorola from transferring anything related to GSM or UMTS—basically half of the business—due to a partnership Moto and Huawei have had since 2000.

Motorola resold Huawei network gear under the Moto name, and in the process gained access to Huawei intellectual property and confidential information. According to Huawei’s lawsuit, filed in U.S. District Court, transferring the GSM business to NSN would effectively be giving one of Huawei’s biggest rivals the low-down on its product lines.

The suit is bad news either way for NSN, which has been trying to acquire all of Moto’s non-iDEN network assets for more than year. NSN had its sights set on the larger Nortel, offering $650 million to buy that company’s CDMA and long-term evolution assets. Ericsson, however, swooped in with a $1.1 billion offer, winning both businesses and then scooped up Nortel’s GSM business for another $103 million.

NSN wound up taking the Motorola businesses as a consolation prize, but it paid essentially the same amount, $1.2 billion, to gain a much smaller network business. The plan was to close the deal by the end of 2010, but dealing with Chinese regulators had delayed the deal until at the first quarter of this year.

If Huawei were to win its lawsuit, NSN would lose out on a GSM business that brought in more a third of Motorola Networks’ revenues last year. More importantly to NSN, it would lose Moto’s sizable install base of customers.

Moto has 80 active GSM networks running in 66 countries. NSN presumably is in this deal to gain access to customers and markets it doesn’t currently serve. Compared to Moto’s 20 CDMA networks and 22 WiMax networks, the GSM networks are the bigger prize.