October 26, 2005

In a move that will help it converge its wireless and wireline networks, L.M. Ericsson yesterday announced plans to acquire key pieces of Marconi's telecommunication business for $2.1 billion.

"The acquisition of Marconi's telecommunications businesses has a compelling strategic logic and is a robust financial case," said Carl-Henric Svanberg, president and chief executive of Ericsson.

"As fixed and mobile services converge, our customers will substantially benefit from this powerful combination." In the deal, Ericsson will acquire Marconi's telecom equipment assets, including DSL, softswitch and optical assets, along with the Marconi trademark, associated brand names and IPR.

"This acquisition is all about network convergence," said Jean-Charles Doineau, research director at Ovum.

"Buying some of Marconi's assets, Ericsson complements its product portfolio in areas which will be of a very strategic importance for mobile operators and for convergent network operators, at the same time.

And it is not only about the fixed business." The acquisition does not include Marconi's London headquarters, certain businesses in the United Kingdom and Germany, and Marconi's U.K. pension plan.

The majority of Marconi's remaining operations are in the U.K., Italy, Germany and United States. Marconi said it will be renamed Telent plc and will be a service provider to telecommunications and enterprise customers, including Ericsson in the U.K.

Marconi will retain its UK Pension Plan and its net cash as of Dec. 31, 2005. As of Sept. 20, 2005, the company had about $490 million in net cash.

Marconi shareholders should receive $4.46 to $5.56 per share in cash in the first quarter of 2006. "Ericsson and Marconi know each other well and have had a successful partnership for over 10 years," said Svanberg.

"We bring together two pioneering telecom companies with a combined heritage of more than two centuries in the industry."

Source: RCR News