Sweden's Telefonaktiebolaget LM Ericsson, which also bought Nortel's wireless division for US$1.13 billion, and Austrian telco Kapsch CarrierCom AG were the two successful bidders in the auction that ended late Tuesday night.
The deal will see Ericsson buying Nortel's North American GSM business for about US$70 million, while Kapsch will pay $33 million for the GSM-R - or GSM for railways - division as well as the portions of the GSM business related to the Taiwan and the Europe, Middle East and Africa, or EMEA, regions.
"This is a major step forward for our business. These acquisitions will enable our customers to continue to benefit from the product innovation and support that they've come to expect from us," said Graham Richardson, Nortel's general manager for the GSM/GSM-R business, in a statement.
The deal preserves 680 jobs for current Nortel employees, including some in certain EMEA jurisdisctions who will automatically transfer to Kapsch by operation of law.
"The transaction emphasized Ericsson's commitment to the North American market and strengthens our position as the leading provider of telecommunications technology and services in the United States and Canada," stated Hans Vestberg, incoming president and CEO of Ericsson.
Ericsson said the GSM acquisition, along with its previous purchase of Nortel's code division multiple access and long-term evolution assets, as well as its services agreement with Sprint, makes North America its largest geographical segment and nearly triples its workforce in the region to 14,500 from 5,000 at the beginning of 2009.
That number includes the 350 Nortel employees to whom Ericsson will offer employment as part of the GSM transaction. Ericsson spokesperson Patricia Maclean said the transaction would have little effect on local Nortel staff as most of the GSM operations are located in the United States, with Canadian employees for the division mostly serving in support roles.
Ericsson added the deal gives it an installed base of GSM, the most widely used wireless technology standard for mobile phones in the world, and includes the transfer of key contracts with North American operators such as AT & T and T-Mobile. It also provides Ericsson with a business that generated approximately US$400 million in 2008.
Meanwhile, Kapsch said the transaction would solidify a relationship that has existed for more than 20 years, and would help launch its international presence.
"This acquisition transforms Kapsch CarrierCom from a regional player to the global market leader in GSM-R," said Kapsch's chief operating officer Thomas Schopf in a statement.
Kapsch currently has about 350 employees in total, with both its head office and development centre in Austria and a service network in southeastern Europe.
The GSM/GSM-R sale is subject to court approvals in the U.S. and Canada, which Nortel will seek at a joint hearing on Dec. 2, and at a later date in France.
Nortel said it expects to seal the deal at the end of the first quarter of 2010.
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