September 1, 2006 12:26 PM PDT

Alcatel to buy part of Nortel wireless unit

Alcatel said Friday that it plans to buy some of Nortel Networks' wireless access infrastructure equipment for $320 million in an effort to beef up its 3G wireless business in Europe and Asia.

Specifically, Alcatel is buying Nortel's Universal Mobile Telecommunications System (UMTS) radio access equipment, including base stations, radio network controllers and operation and administration software. UMTS is one of the third-generation (3G) mobile-phone technologies that provide faster speeds for new data applications on mobile phones. UMTS uses W-CDMA (Wide-Band Code Division multiple access) as the underlying standard and is often marketed as 3GSM, since it was designed to replace GSM (Global System Mobile communications), a widely used second-generation wireless technology.

Most of Nortel's employees working in the UMTS business unit are expected to be transferred to Alcatel, the companies said.

With this deal, Alcatel will become the world's third-largest supplier of UMTS radio access products, behind leaders Ericsson and Nokia Siemens Networks.

"We are clearly poised to become a strong No. 3 in UMTS," Marc Rouanne, president of Alcatel's mobile communications activities, said in a statement. "Combined with our strong GSM/EDGE position, our early leadership in WiMax and our strong commitment to LTE (Long Term Evolution), this acquisition will add further momentum to Alcatel's broadband wireless access strategy."

The addition of Nortel's UMTS business will give Alcatel 14 new customers, including Vodafone in Spain, Italy, Portugal and Britain; as well as Orange in France, Belgium, Slovakia and Poland. It will also boost Alcatel's presence in Asia, particularly South Korea and China, where the company already has a strong presence with equipment used to build 2G and 2.5G networks based on GSM and EDGE (Enhanced Data for GSM Environment) technology.

The deal comes as Paris-based Alcatel plans to merge with the American telecom equipment company Lucent Technologies, which has CDMA (Code Division Multiple Access) and EV-DO (Evolution Data Optimized) wireless infrastructure products used mostly in the U.S. market. Shareholders are expected to vote on the deal Thursday. Alcatel said it will work with Lucent to plan the integration of the Nortel UMTS business with existing Lucent and Alcatel wireless technology and product portfolios.

The deal will help Nortel slim down and focus its strategy. Nortel has struggled over the past few years and has been embroiled in an accounting scandal that forced it to restate several quarters of earnings.

The divestiture of its UMTS business, which has been unprofitable for Nortel, should help the company focus more on new growth opportunities. While Nortel plans to keep its existing GSM products, used mostly in Europe and Asia, and its CDMA/EV-DO business, which is used primarily in the U.S., it will also focus on new wireless technologies, such as WiMax.

Analysts are encouraged by the Nortel UMTS sale, but they cautioned investors that Nortel still has a long way to go.

"Nortel is making difficult but necessary changes and we are encouraged that it is taking action on its plan to rethink its business operations from a strategic point of view," Mark Sue, an analyst with RBC Capital Markets, said in an investor note published Friday. "We note however that the pace of recovery will take some time."

See more CNET content tagged:
Nortel Networks Corp., Alcatel, UMTS, wireless technology, broadband wireless

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SWANsat to Turn Earth into Wi-Fi Hotspot (4G)
IOSTAR, SANDIA LABS, ORBITAL. The pioneers of GPS & Teledesic  together with directors such as 4 Star General Tony McPeak & former secretary of US Air Force (Roche) and former Branch Chief of guided missiles & CEO of Western Digital  are coming together for intriguing development called SWANsat.

Imagine a series of at least three geosynchronous orbital satellites providing wireless Internet access to the entire world. Thats exactly what a project called SWANsat or Super-Wide Area Network Satellite plans to do by the year 2011. They intend to be a global broadband Internet service provider that can facilitate up to 600 million connections per satellite. All you need is a handheld mobile device to connect to the system.

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The Teledesic Chief Architect (now President of IOSTAR) recently made this presentation:

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