Alcatel to acquire Nortel's UMTS Division

Strengthening its 3G wireless business in Europe and Asia, the Paris, France based Alcatel on Friday announced its plans to acquire Ontario based Nortel's Universal Mobile Telecommunications System (UMTS) network access equipment division for $320 million.

Besides Nortel's UMTS division, the French equipment provider is also taking control of its base stations, radio network controllers and operation and administration software.

Alcatel said it expects that a mass majority of employees of Nortel's UMTS access business will be shifted to Alcatel. "The expertise of Nortel's UMTS team is well-known, and I am confident that our combined forces will pave the way for further success in the wireless market," Marc Rouanne, president of Alcatel's mobile communications activities, said.

Universal Mobile Telecommunications System (UMTS) is one of the third-generation (3G) mobile-phone technologies that provide faster speeds for new data applications on mobile phones. It uses W-CDMA (Wide-Band Code Division multiple access) as the underlying standard and is often marketed as 3GSM, emphasizing the combination of the 3G nature of the technology and the GSM (Global System Mobile communications) standard which it was designed to succeed.

The Memorandum of Understanding (MoU) the companies signed yesterday (Sept.1) conceives of the sale of all the UMTS access product portfolio, made up of the Radio Network Controller and Node B products and OAM solutions, related services and associated assets.

Once the deal is settled, likely to be in the fourth quarter of current year, Alcatel will become third in the global market for UMTS, behind Ericsson and Nokia.

“We are clearly poised to become a strong No. 3 in UMTS,” Rouanne said in a statement, adding that "Combined with our strong GSM/EDGE position, our early leadership in WiMax and our strong commitment to LTE (Long Term Evolution), this acquisition will add further momentum to Alcatel's broadband wireless access strategy."

On the other hand, about their decision to sell the wireless division, Nortel president and CEO Mike Zafirovski said that the sale of the UMTS business to Alcatel means that Nortel has sliced off a portion of 3G networks as an area in which Nortel cannot compete in an effective manner.

Company CEO further said that the company however maintains a strong position in 2G, and is pursuing CDMA opportunities in 3G, and the company also has a strong base in relevant 4G technologies such as OFDM, MIMO antennas, and WiMax.

"We did not see a way to have any reasonable returns on UMTS on a short-term basis, and saw Alcatel's prospects for this market as much better," Zafirovski said. "However, we have every intention of retaining our core expertise in Rev. C, OFDM, and MIMO."

The addition of Nortel's UMTS business will confer Alcatel 14 new customers, including Vodafone in Spain, Italy, Portugal and Britain; as well as Orange in France, Belgium, Slovakia and Poland. It will also uplift Alcatel's presence in Asia, specefically South Korea and China, where the company already has a strong existence with equipment used to build 2G and 2.5G networks based on GSM and EDGE (Enhanced Data for GSM Environment) technology.

Both the companies still have to reach a definitive deal and an agreement is subject to regulatory and other nods.

In the Toronto Stock Exchange, Nortel on Friday gained 3 Canadian cents, or 1.3%, to C$2.34 after it announced the propsed selloff.