Nortel accepts US$282M deal for VoIP division

Genband stands to gain a broad install base and augment its customer and carrier relationships around the world if it wins its bid for Nortel Networks Corp.’s carrier VoIP (Voice over IP) and application solutions (CVAS) business, according to an industry analyst.

Nortel Networks entered into an agreement Wednesday to sell its CVAS business to Genband for US$282 million.

Ronald Gruia, principal telecom analyst at Frost and Sullivan, said Genband could acquire Nortel’s legacy flagship product, DMS-100, a class 5 circuit-switched voice technology, as well as global assets in North America, the Caribbean, Asia and Europe. “Nortel has a great install base that it could leverage,” said Gruia.

But while Genband has the advantage of being first bidder and setting the floor for other potential bidders like Sonus Networks Inc. and Nokia Siemens Networks, the bid is a “bit of a stretch” for Genband, said Gruia. If the bidding goes higher, Genband and Sonus could find it challenging, he added.

The winning bid will probably be known in January, said Gruia. “I think it’s going to be interesting to see how this unfolds,” he said.

Just like previous deals for its assets, Nortel has entered into a so-called stalking horse agreement, which means that the $282 million is an initial bid for the VoIP assets. Other companies can in an upcoming auction also decide to bid on the assets, Nortel said in a statement.

In January, Nortel hopes to seek court approvals for the bidding procedures, including a bid deadline and tentative auction date.

Genband has teamed up with One Equity Partners to secure the financing, according to the statement.

Nortel's Carrier VoIP and Application Solutions business and Genband is a good fit because they are already partners, according to an open letter from Charlie Vogt, Genband's CEO, to Nortel employees. The new company would combine Nortel's carrier VoIP and softswitch expertise with Genband's IP gateway portfolio, he said.

The carrier VoIP market has seen a tumultuous year but has begun to stabilize, Infonetics wrote in a research note earlier this month. However, Infonetics still expects about a 30 percent drop in worldwide revenue compared to 2008.

Nortel filed for bankruptcy protection in January, and has since June sold off its wireless, metro Ethernet and enterprise businesses.

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