Marconi Communications will purchase Nokia's SDH (synchoronous digital hierarchy) and DWDM (dense wave division multiplexing) transport equipment business for an initial $118 million.
An additional $53.8 million will be paid to Nokia depending on the future performance of the business, officials said.
Nokia's Synfonet brand, existing SDH and DWDM products and about 120 staff from its Cambridge research and development business will be acquired by Marconi under the deal.
In a related agreement, Nokia and Marconi also announced they have signed an OEM deal, under which Marconi will supply Nokia with SDH and DWDM products, enabling Nokia to continue to supply products to customers.
It is expected the acquisition will be completed by December 1999.