Ericsson on CDMA purchase: This time will be different

NSN’s original offer, however, did tie Ericsson’s hands by establishing the parameters of the auction to Nortel’s CDMA and LTE businesses. Nortel also has significant GSM and mobile switching assets that weren’t included in either offer. “The assets were fairly well defined as the stalking horse bid was defined,” Vestberg said. “There wasn’t much possibility we could change that. But anyhow, we believe this is a good asset focused on the North America CDMA market. We are happy for it.”

Ericsson already has a large wireless and wireline operation in North America, bringing in $2.7 billion, but with the addition of revenues from its managed services deal with Sprint and Nortel’s CDMA group, Ericsson estimates it can almost double its size domestically, generating $5 billion in annual sales. NSN’s presence in North America is much smaller, but the vendor has targeted the region as one of its key focus areas for expansion. The stiff competition between the two wireless giants lead one analyst to ask whether Ericsson was purchasing the CDMA and LTE assets just to prevent NSN from getting its hands on them. Outgoing CEO Carl-Henric Svanberg quickly tried to dispel that notion.

“Of course, any deal anyone makes has an impact on the rest of the competitive landscape, but we do not believe in making deals from a negative or backwards rationale,” said Svanberg who will take over the reins of energy giant BP in January. “We do them for the offensive rationale—for what we can do with the business—and that’s where we’re coming from.”

While Ericsson has made clear it plans to leverage the CDMA assets to gain market share in the US, it was more opaque on its plans for Nortel’s LTE technology. Ericsson already has an LTE product line, and it didn’t announce any plans to incorporate Nortel products or technology into its existing portfolio. Instead, Vestberg focused on how Nortel’s technology could be used to provide an upgrade path for CDMA operators to LTE.

“We will continue with our standard development in the LTE business that we’re doing today, and we believe that the assets coming from Nortel will work with the migration of CDMA to LTE,” Vestberg said. “That is a great asset that we needed to build anyhow. Now we get a step up.”