Alcatel About To Buy Nortel UMTS Operations

Wires were buzzing throughout the financial markets yesterday as news emerged that Alcatel is in advanced talks to buy some of Canadian Nortel Networks Corp’s (NT) assets.

Oddo Securities said in an analyst note, “Based on our contacts at Nortel France the acquisition process seems fairly well advanced.” The note adds that the purchase would be of Nortel’s division that produced equipment for UMTS, a third-generation mobile technology most widely used in Europe.

Alcatel refused to comment on this yesterday but said that: “Alcatel is open to options that will increase and reinforce leadership in the technology sector.”

Nortel said only: “We have indicated that we are going to make a decision about the UMTS access business. Divestment is one option.”

Nortel is currently repositioning itself in a shifting telecom equipment vendor landscape and its UMTS access business is considered to be below critical mass.

Oddo values the UMTS unit of telecom equipment maker Nortel North America at around EUR1.5 billion and notes the unit generated EUR2.2 billion in revenue in 2005. Oddo Securities estimates that it had a negative operating margin of 15%.

UMTS, Universal Mobile Telecommunication System, is almost universally subscribed to standard for the third generation of mobile phone and is generally based on W-CDMA (Wideband Code Division Multiple Access). It promises a permanent internet connection of at least 384kbps and up to about 2mbps, combined with highly integrated devices and a super-fast back end.