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Nortel Sells Stake in LG Venture to Ericsson

After nearly a year, bankrupt Nortel Networks has secured the “sound future” it sought for its share of the joint venture with LG Electronics (LGERF.PK). On Wednesday, Ericsson (ERIC) said it will buy the 50-percent-plus-one-share stake for $242 million and change the initiative’s name to LG-Ericsson. Ericsson has been the rumored buyer since March.

The Nortel-LG project, which developed 4G products, is not part of Nortel’s creditor protection proceedings. But selling its involvement will help Nortel raise money to pay back creditors. The joint venture’s sales dropped 24 percent in the fourth quarter of 2009 to $154 million. In all of 2009, the project reported $650 million in sales.

For Ericsson’s part, the deal means contracts with Korean operators including KT, LG Telecom and SK Telecom, an established sales channel and R&D resources. That’s because Nortel based a major distribution business in Korea.

“Korea is one of the largest telecom markets with advanced end-user demand of new services,” Hans Vestberg, president and CEO of Ericsson, said in a prepared statement. By partnering with LG Electronics, then, Ericsson “will enhance our position for future technology shifts such as LTE,” he added. The LTE standard is taking root in Asian and European countries quickly, much more so than in the United States where carriers including Verizon Wireless (VZ) and AT&T Inc. (T) have yet to trial their 4G networks.

LG Electronics executives expressed sentiments similar to Vestberg’s, citing Ericsson’s global industry experience and technical expertise as keys to the venture’s growth.

LG-Ericsson will remain headquartered in Seoul. Ericsson expects the deal to boost profits within a year after closing; all of the involved companies need approvals entities including the Ontario Superior Court of Justice.

Nortel, meanwhile, continues to wind down operations. The most valuable assets in its arsenal now seem to be patents, since the wireless, enterprise, carrier VoIP, Metro Ethernet and other units have been sold at various auctions.


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