NSN last Friday announced it has entered a “definitive agreement” to acquire for US$650 million the Nortel business that makes wireless technologies using the code division multiple access (CDMA) and Long Term Evolution (LTE) standards. The deal is subject to approval by bankruptcy courts in both Canada and the U.S.
The acquisition, for NSN, is about “having a deeper base in Canada,” said Simon Beresford-Wylie, CEO of Nokia Siemens Networks.
On a conference call yesterday, Beresford-Wylie said Nokia Siemens Networks now has offices in Vancouver, Calgary, Toronto and Montreal.
If the deal to buy Nortel’s CDMA and LTE assets is approved, Nokia Siemens Networks would inherit “a large site in Ottawa and “several other small sites,” Beresford-Wylie said. These employees would focus on development, product management, operations, sales, service and LTE trials, he added.
“We plan to keep Canada absolutely at the heart of wireless research,” Beresford-Wylie said, adding Canada has a “very fine reputation in the telecom sector for innovation, fine products and customer services.”
Nokia Siemens’ Channel Partner Program has two levels: Sales Partners and Premium Partners. Sales partners get technical training along with sales and marketing support. Premium partners get commercial grade equipment and training, access to co-branded sales and marketing templates and basically a seat at the table with NSN executives for strategy sharing. In this top level, channel partners must produce a three-year business plan that includes sales forecasts, a six-to-12 month marketing plan, and must have at least three qualified sales representatives.
NSN officials would not comment on reports the company is interested in other Nortel business units. On Friday Nortel said it was in “advanced discussions” to sell its other units and has asked the Toronto Stock Exchange to delist its shares, which were trading at 18 cents last week, down from $123 in the summer of 2000 (before a ten-for-one consolidation).
Nortel “has made a significant contribution to Canada’s high tech capabilities,” Beresford-Wylie said Monday.
NSN officials acknowledged CDMA sales are dropping as wireless carriers migrate their networks to third and fourth-generation technologies, but Beresford-Wylie said CDMA was profitable for Nortel. “Along with it comes a tremendous customer base,” he said.
Sue Spradley, president for North America at Nokia Siemens Networks, was also on the conference call. She said while carriers may be moving away from CDMA, “many will take their time doing that.” Therefore, Spradley said, acquiring Nortel CDMA customers will give NSN the opportunity to sell them services and products to migrate their networks to next generation.
NSN plans to keep “the majority” of current Nortel CDMA and LTE employees, meaning about 2,500 would be offered jobs with NSN, about 800 of those in Canada. Of the 800 in Canada, “the bulk of those” would work in Ottawa, Beresford-Wylie said, adding NSN expect those 800 are the “bulk of” current Nortel CDMA and LTE workers in Canada.
But it will be up to Nortel to pay them any pension or retirement health care benefits for their years of service with Nortel, Beresford-Wylie said.
“We’re expecting the employees will come to NSN with a recognition of their years of service and that those years of service will count towards eligibility and other benefits under the NSN terms and conditions,” said Michael Matthews, NSN’s head of strategy and business development. “So the normal practices we would offer for things like holiday and (retirement savings plans) and salary and bonus and severance and other things will apply based on the years of service that employees are bringing with them. We’re not expecting to bring any other liabilities from a benefits perspective.”
Though the deal is a “definitive agreement,” Beresford-Wylie said the assets will still “be subject to a public auction,” meaning another company could offer more than $650 million.
It is also subject to approval by the U.S. bankruptcy court, which is scheduled to hold a hearing June 29.
The Canadian hearing, in the Ontario Superior Court, Commercial List, is expected “around the same time”, Beresford-Wylie said, adding he is optimistic the deal “will close by the middle of the third quarter of 2009.”
Mark Zigler, a lawyer with Koskie Minsky, represents former employees of Nortel. He said his clients will probably make a submission in court but noted right now no alternative has been presented.
“There’s no alternative unless someone comes forward with one and no one has,” he said. “All that’s happening is this company keeps losing money and ultimately will become insolvent on its own.”
Nortel, which was founded in 1895 as Bell Canada’s manufacturing unit, filed for bankruptcy protection in January.
Though it had more than $2 billion in cash, it had more than $45 billion in long-term debt and nearly $3 billion in “other liabilities,” such as pensions, as of Dec. 31. The firm has lost money every year since 1998, except for 2006.