Nortel Selects Ericsson and Kapsch as Successful Bidders for GSM/GSM-R Business
Ericsson and Kapsch emerge as successful joint bidders for US$103 million in cash
Sale to include substantially all of the assets of th global GSM/GSM-R business with approximately 680 Nortel employees
U.S. and Canadian court approvals of sale will be sought at a joint hearing on December 2, 2009
November 25, 2009 — Nortel* Networks Corporation [OTC: NRTLQ] announced that it, its principal operating subsidiary Nortel Networks Limited (NNL), and certain of its other subsidiaries, including Nortel Networks Inc., Nortel Networks UK Limited (in administration), and Nortel Networks SA (NNSA) have concluded a successful auction of substantially all of the global assets of Nortel’s GSM/GSM-R business. Telefonaktiebolaget LM Ericsson (”Ericsson”) and Kapsch CarrierCom AG (”Kapsch”) are the winning joint bidders with a purchase price of US$103 million in cash.
The sale is subject to court approvals in the U.S. and Canada, which Nortel will seek at a joint hearing on December 2, 2009, and in France. The sale is also subject to certain regulatory approvals, information and consultation with employee representatives and/or employees in certain EMEA jurisdictions, other customary closing conditions and certain post-closing purchase price adjustments. Nortel will work diligently with Ericsson and Kapsch towards an expected sale close in the first quarter of 2010, subject to the timing of obtaining regulatory approvals.
If approved by the courts, Ericsson will purchase the North American GSM business and Kapsch will purchase the European and Taiwan GSM businesses. Kapsch will also purchase the global GSM-R business. Nortel has more than 15 years experience with this technology and is the number one GSM-R provider globally.
Each bidder will assume the relevant customer contracts in their specified regions as well as the products, specified patents predominantly used in the GSM/GSM-R business and non-exclusive licenses of other relevant patents.
Approximately 680 Nortel employees will receive offers of employment from the joint bidders. This includes those employees assigned to the GSM/GSM-R business in certain EMEA jurisdictions who will transfer automatically to Kapsch by operation of law.
“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, GM for the GSM/GSM-R business, Nortel. “Today’s announcement is also a turning point for our employees, the majority of whom will take their considerable expertise on to Ericsson and Kapsch.”
“The transaction emphasizes 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” said Hans Vestberg, incoming President and CEO of Ericsson.
“We have worked closely with Nortel on the GSM/GSM-R business for over 20 years. This acquisition transforms Kapsch from a regional player to the market leader in GSM-R,” said Thomas SchÃ¶pf, Chief Operating Officer of Kapsch.
Mag. Georg, Chief Executive Officer of Kapsch, said:
GSM (Global System for Mobile communications) is the most popular wireless technology standard for mobile phones in the world. Nortel is a leading supplier of GSM networks and has worked with operators worldwide on implementing the GSM family of access technologies including GSM/GPRS/EDGE. Also based on GSM technology is GSM-R (GSM for Railways) which provides a secure communications system for railways operators.
As previously announced, Nortel does not expect that the Company’s common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.
For more information, visit Nortel on the Web at www.nortel.com . For the latest Nortel news, visit www.nortel.com/news .
Certain statements in this press release may contain words such as “could”, “expects”, “may”, “should”, “will”, “anticipates”, “believes”, “intends”, “estimates”, “targets”, “plans”, “envisions”, “seeks” and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on Nortel’s current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Nortel operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. Nortel’s assumptions, although considered reasonable by Nortel at the date of this report, may prove to be inaccurate and consequently Nortel’s actual results could differ materially from the expectations set out herein.
Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) risks and uncertainties relating to the Creditor Protection Proceedings including: (a) risks associated with Nortel’s ability to: stabilize the business and maximize the value of Nortel’s businesses; obtain required approvals and successfully consummate pending and future divestitures; ability to satisfy transition services agreement obligations in connection with divestiture of operations; successfully conclude ongoing discussions for the sale of Nortel’s other assets or businesses; develop, obtain required approvals for, and implement a court approved plan; resolve ongoing issues with creditors and other third parties whose interests may differ from Nortel’s; generate cash from operations and maintain adequate cash on hand in each of its jurisdictions to fund operations within the jurisdiction during the Creditor Protection Proceedings; access the EDC Facility given the current discretionary nature of the facility, or arrange for alternative funding; if necessary, arrange for sufficient debtor-in-possession or other financing; continue to have cash management arrangements and obtain any further required approvals from the Canadian Monitor, the U.K. Administrators, the French Administrator, the Israeli Administrators, the U.S. Creditors’ Committee, or other third parties; raise capital to satisfy claims, including Nortel’s ability to sell assets to satisfy claims against Nortel; maintain R&D investments; realize full or fair value for any assets or business that are divested; utilize net operating loss carryforwards and certain other tax attributes in the future; avoid the substantive consolidation of NNI’s assets and liabilities with those of one or more other U.S. Debtors; attract and retain customers or avoid reduction in, or delay or suspension of, customer orders as a result of the uncertainty caused by the Creditor Protection Proceedings; maintain market share, as competitors move to capitalize on customer concerns; operate Nortel’s business effectively in consultation with the Canadian Monitor, and the U.S. Creditors’ Committee and work effectively with the U.K. Administrators, French Administrator and Israeli Administrators in their respective administration of the EMEA businesses subject to the Creditor Protection Proceedings; continue as a going concern; actively and adequately communicate on and respond to events, media and rumors associated with the Creditor Protection Proceedings that could adversely affect Nortel’s relationships with customers, suppliers, partners and employees; retain and incentivize key employees and attract new employees as may be needed; retain, or if necessary, replace major suppliers on acceptable terms and avoid disruptions in Nortel’s supply chain; maintain current relationships with reseller partners, joint venture partners and strategic alliance partners; obtain court orders or approvals with respect to motions filed from time to time; resolve claims made against Nortel in connection with the Creditor Protection Proceedings for amounts not exceeding Nortel’s recorded liabilities subject to compromise; prevent third parties from obtaining court orders or approvals that are contrary to Nortel’s interests; reject, repudiate or terminate contracts; and (b) risks and uncertainties associated with: limitations on actions against any Debtor during the Creditor Protection Proceedings; the values, if any, that will be prescribed pursuant to any court approved plan to outstanding Nortel securities and, in particular, that Nortel does not expect that any value will be prescribed to the NNC common shares or the NNL preferred shares in any such plan; the delisting of NNC common shares from the NYSE; and the delisting of NNC common shares and NNL preferred shares from the TSX; and (ii) risks and uncertainties relating to Nortel’s business including: the sustained economic downturn and volatile market conditions and resulting negative impact on Nortel’s business, results of operations and financial position and its ability to accurately forecast its results and cash position; cautious capital spending by customers as a result of factors including current economic uncertainties; fluctuations in foreign currency exchange rates; any requirement to make larger contributions to defined benefit plans in the future; a high level of debt, arduous or restrictive terms and conditions related to accessing certain sources of funding; the sufficiency of workforce and cost reduction initiatives; any negative developments associated with Nortel’s suppliers and contract manufacturers including Nortel’s reliance on certain suppliers for key optical networking solutions components and on one supplier for most of its manufacturing and design functions; potential penalties, damages or cancelled customer contracts from failure to meet contractual obligations including delivery and installation deadlines and any defects or errors in Nortel’s current or planned products; significant competition, competitive pricing practices, industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles, and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Nortel’s performance if its expectations regarding market demand for particular products prove to be wrong; potential higher operational and financial risks associated with Nortel’s international operations; a failure to protect Nortel’s intellectual property rights; any adverse legal judgments, fines, penalties or settlements related to any significant pending or future litigation actions; failure to maintain integrity of Nortel’s information systems; changes in regulation of the Internet or other regulatory changes; and Nortel’s potential inability to maintain an effective risk management strategy.
For additional information with respect to certain of these and other factors, see Nortel’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
*Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.
Contacts for Press and Analysts:
Bo Gowan Matthew Wray Isabelle Tadmoury
+1-972-685-8278 +852-2100-2238 +3316955-4291