Ericsson sees robust margin at Nortel unit

Ericsson Chief Executive Carl-Henric Svanberg presents second-quarter results at a news conference in Stockholm July 24, 2009.

STOCKHOLM (Reuters) - Telecoms equipment maker Ericsson (ERICb.ST) said on Monday it expected the wireless assets to be acquired from Nortel Networks Corp (NRTLQ.PK) to produce a double-digit operating margin this year.

The deal, expected to close in the third quarter, will generate synergies in sales, services and research and development, said Ericsson Chief Financial Officer Hans Vestberg said during a conference call.

Vestberg, who is due to become chief executive at the turn of the year, said he agreed that the wireless acquisition could show an operating margin of more than 10 percent this year.

The Swedish company, whose stock dropped 3 percent on Monday, said at the weekend it had won an auction to buy the wireless assets of Nortel in a $1.13 billion deal.

The company beat two other bidders -- its smaller rival Nokia Siemens Networks and private equity firm MatlinPatterson.

Ericsson said in a statement that it expected the transaction to have a positive effect on its earnings within a year of the closing the deal.

Research In Motion (RIM.TO) (RIMM.O) , the Canadian company that makes the BlackBerry smartphone, was also chasing a deal for the Nortel technology but has said that Nortel effectively blocked its approach, valued at $1.1 billion.

Nortel said RIM had refused to comply with confidentiality provisions that other bidders had agreed to follow.

RIM, whose stock was up 1.8 percent in Toronto trade on Monday, is expected to use a bankruptcy court hearing on Tuesday to voice its objections about the bidding process.

Ericsson's Vestberg acknowledged that there were still some issues to be resolved on the acquisition.

"On the RIM claims, of course there are some regulatory issues still left to be defined," Vestberg said.

"However, as we can see it right now ... we feel confident that this (deal) will all go through but we still have a lot of respect for the process that will come."

Canadian Industry Minister Tony Clement said on Monday he still hasn't decided whether he will intervene in the deal. He added he must wait until the courts have had a chance to review the auction's results.

Under the deal Ericsson will get Nortel's businesses in CDMA wireless technology used in North America. It will also get businesses related to long-term evolution (LTE) high-speed wireless technology that many of the world's biggest operators plan to use to upgrade their telecommunications networks, as well as some patents.

Vestberg said operators were likely to continue to invest in CDMA equipment for some time before making the switch into the higher-capacity LTE technology.

"Our initial contacts and the feeling that we got from our teams and the discussions we have had is that they will continue to invest in CDMA for a couple of years more, and then of course (there is) maintenance," he said.

(Additional reporting by Wojtek Dabrowski in Toronto; editing by Greg Mahlich and Karen Foster)