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There are plenty of industry news items from the past few days on which to comment. First, Nortel has entered into an agreement to sell its CDMA business and LTE access assets to Nokia Siemens Networks for US$650 million. According to Nortel, “in the U.S., this sale requires a court-approved bidding process, known as a ‘stalking horse,’ or 363 Sale under Chapter 11 of the U.S. Bankruptcy Code. Consummation of the ‘stalking horse’ transaction is subject to higher or otherwise better offers. This ‘stalking horse’ process is controlled and prescribed through the courts and we must ensure it is a fair and open one. You will see very limited discussion around what a combined business would look like as we cannot favor the ‘stalking horse’ purchaser over another potential bidder. There will be no business or portfolio integration taking place until the process has been completed and definitive purchase agreements are in place. In addition to the auction process and Ontario Superior Court and U.S. Bankruptcy Court approvals, the agreements are subject to other customary approvals, including government approvals such as in Canada and the U.S.” The wireless business is the second largest supplier of CDMA infrastructure in the world. As of Janusry 2008, according to a CDMA Development Group, CDMA2000 is the most widely deployed 3G technology, with 250 operators in 99 countries serving more than 430 million subscribers. Nortel was reported to hold the #1 position for EVDO commercial deployments. NSN hopes to tap into CDMA operators who are opting for a fast track towards LTE such as KDDI or Telus Canada. It remains to be seen what portion of CDMA operators will opt in for LTE, especially in developing countries. Nokia has wanted to make a greater push into North America, Asia and other markets where EVDO has strength. Its agreement with Qualcomm paves the way to come out with more devices and have a clear market free of patent litigation and trade sanction concerns. Nortel should help Qualcomm to significantly strengthen its position, including in terms of LTE, but it does come after the initial selection of Ericsson and Alcatel-Lucent by Verizon for LTE. Nortel is also an important owner of OFDM IPR. According to Robert Syputa, neither Nortel nor Nokia has said much about the specifics of the IPR value. Nokia would benefit from Nortel’s MIMO (and OFDM) patent portfolio since the former did not have a particularly strong hand in MIMO patents. Nortel of course was an early developer of MIMO-OFDM. The company has stated that it wants 1% royalties for LTE unless otherwise reduced in consideration of cross-licensing or other value, however this request is unlikely to be met. Considering what Nokia has agreed to pay for Nortel, if the IPR were part of the deal (which we think likely), then a fraction of a percent of royalties would represent hundreds of millions of dollars in revenues over the long term. It will be very difficult to ever wedge this out and overall LTE royalties remain a guess at this point; Nokia will be extremely unlikely to discuss details of plans and negotiations. Any royalty agreement Nokia will enter into will be for its entire LTE portfolio, not just the Nortel portion. In other (unofficial) news, Gilat is said to be in talks to acquire Airspan Networks. The talks are in very early stages, with no guarantee that they will lead to a deal. Airspan has had a tough time over the last 18 months with sales plummeting in a very fragmented market. Maravedis estimates Airspan’s market share to be 4% of the total BWA and WiMAX market and 13% of the fixed WiMAX market. More than a year ago, Gilat considered signing an OEM agreement with Airspan. Since then, Airspan has been removed from regular NASDAQ trade and now trades on the pink sheets market. Estimates are of deal of several million dollars, which would be a bargain for Gilat since Airspan is one of the earliest vendors in the BWA and WIMAX space, with deployments all over the world, valuable accumulated experience in the field, certified equipment, and a skilled staff of engineers. Finally, there are persistent rumors that Taiwanese WiMAX operators are switching to LTE. Rumors have often a purpose, and in this case the intent is likely aimed at pushing the WiMAX camp to speed up the certification process and negotiate better deals within the M-Taiwan program and the ODM community. FITEL confirmed that they are studying the possibility of deploying LTE and have put LTE migration into their network development plan. However, FITEL would prefer to have a mature and good WiMAX business model before LTE comes. They expect that WiMAX can be migrated to TDD-LTE and become a good complementary technology for HSPA now and FDD-LTE in future. There is no official instruction related to WiMAX and LTE migration issues so far from NCC, the telecom regulator in Taiwan. To be continued… Enjoy! For more information, contact the author at afellah@maravedis-bwa.com |
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