Global and regional digital leader LG Electronics has signed a joint venture agreement with Canadian telecom company Nortel Networks to provide cutting edge telecommunications equipment and networking solutions in the wireline, optical wireless and enterprise areas.
The joint venture between Nortel Networks and LG Electronics, tentatively named LG-Nortel Networks, will focus on developing and producing telecom equipment for 3G wireless networks based on W-CDMA (Wideband Code Division Multiple Access) technology. Nortel supplies wireless communications equipment and solutions to mobile markets in 150 countries. The partnership with LG Electronics, which is a major player in next-generation wireless networks, will target domestic and foreign markets by combining Nortel’s telecom equipment and LG’s terminals.
“Our joint venture with Nortel is expected to create greater synergy between our cutting-edge technology and Nortel’s expertise in delivering communications capabilities,” said LG’s CEO and vice chairman S. S. Kim. “Nortel is a powerhouse in the world’s telecommunications equipment market with strong technology and global competitiveness, while LG is a top-notch telecommunication equipment and solutions provider – we were the first company to provide a WCDMA system with video telephony in late 2002. We now want to set the standards for the next generation infrastructure and improve time-to-market in this competitive environment.”
The LG-Nortel joint venture will support the strategies of both companies for ongoing development of wireline, optical, wireless and enterprise communications and networking solutions. LG will transfer its telecoms gear business into the venture, while Nortel will bring fresh investment.
Nortel will own 50 per cent plus one share in the joint venture, in exchange for which it will contribute its South Korean distribution and services business and pay LG US $145 million and other non-monetary considerations. LG may also be entitled to payments over a two-year period based on achievement by the joint venture of certain business goals.
“This is another milestone for Nortel as we continue to demonstrate our commitment to expand in Asia,” said Bill Owens, vice-chairman and chief executive officer of Nortel Owens. “To be a global communications provider, it is imperative for us to expand our market share and compete in Asia. South Korea is known for its advanced and trailblazing technology in communications. Our relationship with LG better positions Nortel in the dynamic and growing Asia market, expedite research and development, and benefit our global customers. Nortel is clearly playing to win.”
LG and Nortel will nominate certain key executives to the management team of the joint venture. J R Lee of LG Electronics and Paul House of Nortel are tipped to be the chief executive officer and chief operating officer respectively of the new company. LG’s infrastructure business and Nortel’s South Korean operations had aggregate revenues of US $530 million in 2004. Lehman Brothers and Woori Securities advised LG on this transaction while J P Morgan handled Nortel. The transaction is expected to close by the end of this year.
LG is renewing its focus on the Middle East region as regional enterprise organisations demand advanced communications solutions and service providers look to compete within a newly deregulated environment.
About LG Electronics, Inc.
LG Electronics, Inc. (Korea Stock Exchange: 066570.KR) was established in 1958 as the pioneer in the Korean consumer electronics market. The company is a major global force in electronics and information and communications products with more than 64,000 employees working in 76 overseas subsidiaries and marketing units around the world. With annual total revenues of more than US $16.9 billion (non-consolidated), LG Electronics conducts its business in three main areas: Digital Display & Media, Digital Appliances, and Telecommunications Equipment & Handsets.
LG Electronics’ goal is to enable the intelligent networking of digital products that will make consumers’ lives better than ever. For more information, please visit www.lge.com
About Nortel
Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world’s most critical information. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world’s greatest challenges. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.
