Nortel wireless auction may heat up

TORONTO (Reuters) - An auction this week for the wireless assets of Canada's Nortel Networks (NRTLQ.PK), valued at a minimum of $650 million, has suddenly become a lot more interesting and may turn into a bidding war.

Preliminary offers to compete with a "stalking horse" bid from Nokia Siemens Networks NSN.UL for bankrupt Nortel's CDMA and LTE wireless technology businesses are due on Tuesday, and an auction is set for Friday July 24.

Until late Monday, the field was expected to be small, highly specialized and not exceedingly competitive. But then Research in Motion (RIM.TO) (RIMM.O), the maker of the ubiquitous BlackBerry smartphone, complained it had been blocked from jumping into the fray -- to the tune of $1.1 billion.

Still, the unexpected emergence of RIM in the proceedings shows there may be more than meets the eye in the Nortel wireless business, analysts say.

"This has abruptly catalyzed the Nortel auction. Somebody who is big and smart has just said, 'We think there is value here,' and at a level roughly double the Nokia Siemens bid," said Duncan Stewart, an analyst at DSAM Consulting in Toronto.

"Now that RIM has made this point, theoretically every other handset manufacturer may have had a light go off and say, 'If RIM thinks there's something important here, maybe we should think there's something important here.'"

MatlinPatterson, a private equity firm that's also a major Nortel creditor, said late Tuesday it had submitted a $725 million offer for the wireless assets. It has said it is open to working with partners in its bid to acquire Nortel assets.

CDMA is a wireless technology widely used in the United States. Long Term Evolution (LTE) is an emerging high-speed wireless technology that many of the world's biggest operators have said they would use for future network upgrades.

RIM, a Canadian technology giant built on venture capital, said Nortel had effectively blocked its potential bid, but analysts say RIM's interest was tantamount to an industry forecast that certain fourth generation, or 4G, technology may become industry standard.

"In current generation 3G handsets, the difference between a RIM antenna and an Apple antenna and a Nokia antenna is pretty trivial," said Stewart. "All of a sudden, antenna technology in next generation networks may in fact become an important differentiator."

Nortel has extensive patents on so-called MIMO, or Multiple Input Multiple Output technology, a form of antenna technology.

Analysts say that if the technology becomes widely used in handsets, smartphone makers who do it best will be able to differentiate themselves from competitors.

"Nokia will likely need to raise its bid given RIM's expression of interest," Peter Misek, of Canaccord Adams in Toronto, said in a research note.

It is not clear who else will participate in the auction on Friday.

From Europe, network equipment rivals Alcatel-Lucent (ALUA.PA) and Ericsson (ERICb.ST) are seen as possible but unlikely entrants to the auction, analysts say. China's Huawei is also possible suitor.

"It's certainly possible for any of these other vendors to get involved," said Deutsche Bank analyst Brian Modoff.

"Alcatel Lucent might be the least likely because they're going through their own integration. Huawei may have trouble getting government clearance. Ericsson could but their balance sheet doesn't look that great right now. They don't need to do this. They have plenty of market share already."

Other analysts cited Apple as a possible suitor.

Stalking horse offers like the one tabled by Nokia Siemens typically set the floor for bidding, and make up the lead bid at a bankruptcy auction.

Nortel Networks (NRTLQ.PK), once one of the world's biggest technology companies, also said on Monday it agreed to sell its enterprise unit to Avaya Inc AVXX.UL for $475 million but said higher bids may emerge.

The company also plans to sell its third remaining unit before the end of the quarter.

Nortel's operations are divided about equally among the wireless business, the enterprise unit, which builds corporate networks, and the Metro Ethernet Networks unit, which makes Internet infrastructure and includes its optical and carrier Ethernet technology.

(Additional reporting by Sinead Carew in New York and Georgina Prodhan in London; Editing by Frank McGurty)