Alcatel Signs with Nortel for 3G

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Alcatel has signed a preliminary agreement to buy Nortel's third-generation cell phone network unit for $320 million, aiming to achieve greater scale amid price competition. The deal will help the provider push into tough markets such as China.

It turns Alcatel into the world's third-largest provider of 3G networks, with a market share of around 12-14 percent, behind leader Ericsson and Nokia/Siemens. Previously, Alcatel on its own had an estimated 3G market share of 3 to 4 percent.

Analysts welcomed the Nortel transaction but warned integrating so many different technologies would be difficult, (don't forget the technology is getting old, Samsung says 3g is already dead.)

Alcatel, which is looking at how it will combine its mobile operations with those of Lucent, said it had signed a non-binding memorandum of understanding to buy Nortel's UMTS radio access business (UTRAN) and related assets. This includes UMTS base stations, radio network controllers, operation and administration maintenance software and associated services.

Nortel said the disposal would allow it to focus better on the development of its next-generation mobile networks business and fixed and mobile converged core networks. The acquisition will give Alcatel 14 new customers including Vodafone in Spain, Italy, Portugal and Britain as well as Orange in France, Slovakia and Poland, Belgium.

Nortel said it had recently won business with Bouygues Telecom, France's third largest mobile operator, to supply it very high speed network technology called HSDPA as part of efforts to upgrade its national network.

Alcatel said the deal remained subject to the execution of a definitive agreement and closing conditions but it expected to complete it in the fourth quarter, the period during which it plans to wrap up its merger with Lucent.