Nortel Networks reached a definitive agreement to sell its UMTS (Universal Mobile Telecommunications System) business to Alcatel-Lucent on Monday, locking down a nonbinding agreement announced in September.
The Brampton, Ontario, company is selling the 3G (third-generation) infrastructure business so it can focus on developing faster 4G mobile systems and supporting customers with earlier CDMA (Code Division Multiple Access) and GSM (Global System for Mobile Communications) technologies.
"We didn't have the scale or momentum to be where we wanted to be and to be able to lead in this space," said Richard Lowe, president of Nortel's Mobility and Converged Core Networks unit.
The deal is part of an overall restructuring kicked off by President and Chief Executive Officer Mike Zafirovski after he took over Nortel last year. The company is trying to cut costs to become more competitive and turn around years of poor financial performance.
When Nortel signed a memorandum of understanding to sell the UMTS business earlier this year, Alcatel was in the process of closing its merger with Lucent Technologies Inc. Those companies closed their deal and became Alcatel-Lucent last Thursday. What Nortel now has is a binding agreement to sell the UMTS business, which it hopes to close by the end of the month. Alcatel-Lucent will pay US$320 million for the business, minus certain deductions and transaction-related costs.
The timing of the agreement just days after the Alcatel-Lucent deal closed was a coincidence, said Alcatel-Lucent spokeswoman Regine Coqueran.
About 1,700 employees from Nortel's UMTS unit will move to Alcatel-Lucent, the companies said. That includes substantially all the research and development team and a portion of other employees in other roles such as sales and support, Lowe said.
Nortel will now focus its research on what it calls 4G technologies, including WiMax, EV-DO (Evolution-Data Optimized) Revision C, and the LTE (Long-Term Evolution) generations of UMTS, according to Lowe. All these eventually will deliver multiple megabits per second of bandwidth to mobile devices, he said.