Nokia Siemens to buy Motorola's networking gear unit to boost U.S. presence

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July 19, 2010 12:30 PM EDT

Nokia Siemens Networks said Monday it agreed to acquire majority of wireless network infrastructure assets of Motorola, Inc. for $1.2 billion in cash to boost its network infrastructure business in the U.S.

Nokia Siemens has been significantly lagging behind L.M. Ericsson, Alcatel-Lucent and Huawei Technologies in the U.S. and the acquisition will make the company the number three wireless gear vendor in the United States.

The deal will also help Nokia Siemens gain incumbent relationships with more than 50 operators and to strengthen its position with China Mobile, Clearwire, KDDI, Sprint, Verizon Wireless and Vodafone.

The company’s prime rival Ericsson supplies network equipments to US carriers including Verizon Wireless and Sprint Nextel Corp.

Motorola’s networks infrastructure business provides products and services for wireless networks, including GSM, CDMA, WCDMA, WiMAX and LTE.

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Nokia Siemens, the world’s number two wireless gear maker behind Ericsson, added that Motorola’s network infrastructure business has 41 contracts in 21 countries in WiMAX and GSM installed base of more than 80 active networks in 66 countries.

Apart from boosting Nokia Siemens’ position in key wireless technologies, the deal will give the company large global footprint in CDMA as Motorola has 30 active CDMA networks in 22 countries.

Finland-based Nokia Siemens, however, said the deal does not impact its financial performance in 2010, but said the deal will boost its profitability and cash-flow and to have "significant upside potential."

The companies expect to complete closing activities by the end of 2010, subject to customary closing conditions including regulatory approvals.

"I believe the addition of Motorola’s Networks business will significantly strengthen our worldwide presence, enhance our scale in the United States, Japan and other priority regions and reinforce our leadership position in the global wireless sector," Rajeev Suri, chief executive officer of Nokia Siemens Networks said in a statement.

Last year, Nokia Siemens lost to Ericsson in a bid to buy bankrupt Canadian telecom equipment vendor Nortel.

Motorola, however, retains the iDEN business, substantially all the patents related to its wireless network infrastructure business and other selected assets.

Motorola has been in the process of splitting into two separate companies for network equipment and mobile phones, and has been looking for prospective bidders for its network business.

About 7,500 employees are expected to transfer to Nokia Siemens Networks from Motorola’s wireless network infrastructure business.

Nokia Siemens Networks and Motorola also are exploring a global relationship in the public safety arena. This relationship would combine Motorola’s leadership in providing solutions to public safety organizations with Nokia Siemens Networks’ commercial LTE solutions.

Shares of Motorola closed at $7.50 Friday on the New York Stock Exchange. The shares were 1.33 percent higher at $7.60 in pre-market trade on Monday.

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