Nortel Networks Ltd. renewed its Asian presence Wednesday as it signed a joint-venture deal with LG Electronics Co. Ltd., forming LG Nortel Co. Ltd., a company that combines the telecom infrastructure business of LG with the distribution and service business of Nortel in South Korea.
In the deal, Nortel will pay $145 million along with other nonmonetary considerations to own 50 percent plus one share of the joint venture. LG may be entitled to payments over two years based on achievements made by the joint venture in certain areas.
“LG Electronics’ R&D excellence coupled with Nortel’s global presence will make this joint venture a top-ranking player in the telecommunications equipment market,” said S.S. Kim, chief executive of LG.
Nortel’s chief executive, Bill Owens, said, “Our relationship with LG better positions Nortel in the dynamic and growing Asia market, will expedite research and development, and will benefit our global customers.”
Nortel’s South Korean operations and LG’s infrastructure business posted aggregate revenues of $530 billion in 2004. For Nortel, the deal could provide a boost to its W-CDMA sales, which fell below analyst expectations during the second quarter.
The companies said they intend to nominate LG’s J.R. Lee to be LG Nortel’s chief executive, and Nortel’s Paul House will be nominated as LG Nortel’s chief operating officer.
Closing of the deal is set to take place by the end of 2005.
Nortel and LG announced plans in March to market jointly WiMAX products and completed live test calls with High-Speed Downlink Packet Access wireless technology.
