Telecom equipment vendor Nokia Siemens Networks said Monday it has agreed to pay $1.2 billion for the majority of U.S.-based Motorola Inc's (MOT) network equipment business in order to gain a stronger foothold in the important North American and Japanese markets.

In a joint statement, the companies said they expect the deal to close by the end of 2010.

"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," Nokia Siemens Chief Executive Rajeev Suri said.

Nokia Siemens, a joint venture between Finland's Nokia Corp. (NOK) and Germany's Siemens AG (SI) said it expects the transaction to strengthen its business relationships with a number of telecom operators including China Mobile Ltd. (CHL), Sprint Nextel Corp. (S) and Vodafone Group PLC (VOD).

As a result of the deal, Nokia Siemens expects to become the largest foreign wireless gear vendor in Japan, the third-largest in the United States, and to strengthen its number two position in the global infrastructure segment.

Sweden's Telefon AB L.M. Ericsson is currently the world's largest network equipment vendor, ahead of Nokia Siemens, Paris-based Alcatel-Lucent (ALU), and China's Huawei Technologies Co.

Approximately 7,500 employees are expected to transfer to Nokia Siemens Networks from Motorola's wireless network infrastructure business when the transaction closes, the companies said.

Nokia Siemens' parent company Siemens AG said in a statement it believes the acquisition will boost the joint venture's global presence and create significant synergies.

Siemens and Nokia will support the deal by transferring a shareholder loan of EUR250 million each into preferred equity, it said, but added that the acquisition will be fully funded by Nokia Siemens.

Motorola's decision to break up the company through the sale of its network equipment business was demanded by activist investor Carl Icahn and aims to increase the company's market value. The company hopes it will force analysts to assess the cellphone and cable set-top boxes businesses separately from the remainder of the company, which makes public-safety equipment and handheld scanners.

Nokia Siemens has made no secret of its ambitions to enter the U.S. market. Last year, it bid for two units of bankrupt Nortel Networks Corp., only to lose the bulk of the wireless-equipment business to Sweden-based market leader Telefon AB L.M. Ericsson (ERIC) and Nortel's metro ethernet unit to U.S.-based Ciena Corp. (CIEN).

Under the deal announced Monday, Nokia Siemens will take over most of Motorola's network equipment assets such as its GSM and CDMA business, while Motorola will retain control of the less widespread iDEN technology and a number of other assets such as network infrastructure related patents.

The acquisition will boost Nokia Siemens' position in the important U.S. market and give it access to a network of new customers who may later choose the vendor for fourth-generation network upgrade deals, said Redeye analyst Greger Johansson.

Still, he said it may prove difficult to integrate Motorola's business and noted that Nokia Siemens itself has recently gone through a rather complex integration process following its merger about three years ago.

Meanwhile, analyst Pierre Ferragu at Bernstein said the valuation of Motorola's assets looks fair, at 0.3 to 0.5 times sales. The deal should be positive for Nokia Siemens as the wider network equipment industry consolidates, he added.

By: DocMemory
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