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UBS on a Nortel-Alcatel Asset Swap
By Mark Evans | January 23, 2007
Amid speculation Nortel and Alcatel could do an asset swap (Nortel’s GSM business to Alcatel; Alcatel’s enterprise unit to Nortel), UBS analyst Nikos Theodosopoulos said in a report that while the deal reflects the growing belief Nortel will de-emphasize wireless in favor of the enterprise market, it’s unclear how a deal would be structured. The issue, he said, is that Nortel’s $2-billion GSM business has declining revenues, while Alcatel’s $1.5-billion enterprise business is growing by mid-single digits. As a result, Theodosopoulos believes Alcatel’s business is worth “several hundred million [dollars] more than Nortel’s so Nortel “may have to put forth additional cash/assets to close such a deal.”
That said, Theodosopoulos said an asset swap would benefit both companies by enhancing Nortel’s status as the leading vendor in the global enterprise voice market (increasing its market share to 22% from 14%), while Alcatel’s share of the GSM business would to 18% from 11% (Ericsson has 38%, while Nokia/Siemens have 32%}.
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