Nokia Siemens Networks has reached an agreement to acquire the wireless equipment business of rival Motorola. Through the deal, the Finnish-German joint venture hopes to gain greater access to the huge US market.
The sky is the limit for Nokia Siemens expansion
Nokia Siemens will pay $1.2 billion (928 million euros) for most of the wireless network manufacturing activities of Motorola under a deal announced on Monday. The companies hope to complete the deal, pending regulatory approval, by December.
Acquistion rumors had been afloat ever since the US company announced plans earlier in the year to split itself into two companies – one for mobile and home devices and one for network infrastructure – and to sell one of the units.
Nokia Siemens has made no secret of its intentions to expand in the US, where the vendor has a small footprint. It faces tough competition from the Franco-American joint venture Alcatel-Lucent, Sweden's Ericsson and, increasingly, China's Huawei and ZTE.
Two unsuccessful bids
Nokia Siemens bid twice, unsuccessfully, for the wireless network assets of Canada's Nortel, which had a significant North American presence but was forced to file bankruptcy.
Motorola claims a number of radio inventions
"The deal is good news for Nokia Siemens, which hasn't been successful in the US and wants a decent footprint there," Julien Grivolas, an industry analyst with the London-based consultancy Ovum, told Deutsche Welle.
While the US is high on its priority list, the European company will also gain access to operators in other key markets, particularly Japan, according to Grivolas. "The deal with Motorola is a global opportunity," he said.
Over the years, Motorola has been able to build up a customer base in two rival digital cell phone technologies, GSM (Global System for Mobile Communications) and CDMA (Code Division Multiple Access). It has also chosen to leapfrog a digital generation to support two emerging rival next-generation wireless technologies: WiMAX and LTE (Long Term Evolution).
Currently, Motorola provides equipment and services to some 135 network operators around the world – around 50 of these represent new customers for Nokia Siemens. The US vendor hopes to turn around its mobile device division with a set of new smart phones, among other products.
Under the agreement, Motorola will retain its "push to talk" technology, known as iDEN. The lucrative technology is used by Sprint Nextel in the US and Nextel in Latin America.
Approximately, 7,500 Motorola employees are expected to transfer to Nokia Siemens, including large research and development sites in the US, China and India.
US government concerns
Analysts see plenty of room for consolidation
But the sale of its wireless infrastructure business underscores the missed opportunities of Motorola, which claims a number of radio technology inventions. Its networks division was eventually eclipsed by rivals, such as Ericsson, Nokia Siemens and more recently Huawei. International standards have made it easier for low-cost Chinese rivals to win market share.
Huawei was also rumored to be interested in buying Motorola. The company reportedly hired a group of specialists and lawyers to overcome potential objections from the US government over gaining access to global telecom networks. The talks cooled in recent weeks.
"This move is a blow to Huawei," Ken Rehbehn, an analyst with Yankee Group, wrote in a research note. The failed bid, he added, "significantly limits (the vendor's) ultimate reach in the region's mobile equipment market."
Author: John Blau
Editor: Susan Houlton