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Alcatel to Buy Nortel's UMTS Unit for USD 320 Million

Alcatel has signed a preliminary agreement to buy Nortel's third-generation cell phone network unit for USD 320 million, aiming to achieve greater scale amid cutthroat price competition.

The deal will help the French communications network provider push into tough markets such as China. It turns Alcatel into the world's third-largest provider of 3G networks, with a market share of around 12-14 percent, behind leader Ericsson and Nokia/Siemens, analysts said.

Analysts welcomed the Nortel transaction but warned integrating so many different technologies would be difficult."I think they got a reasonable price. But you are looking at putting together three different platforms so the execution of this is going to be a challenge," said Richard Windsor, analyst at Nomura in London.

"The key is that we did not feel that we had the market share and the scale to make it (UMTS) a profitable business for us," Scott Wickware, Nortel's Vice President of Mobility & Converged Core Networks, told Reuters in a telephone interview.

The deal would make Alcatel one of the world’s largest suppliers of Universal Mobile Telecommunications System (UMTS) radio access solutions. This deal with Nortel would also gain them as many as 14 extra customers. Alcatel added that as part of this deal, they would hire 'a significant majority' of employees of Nortel’s UMTS business. This acquisition would give them a stronger presence in 'a significant majority' of employees of Nortel’s UMTS business.


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