Telecom equipment and handset maker Motorola has sold most of its network infrastructure unit to leading equipment manufacturer Nokia Siemens Networks (NSN) for $1.2 billion. As part of the deal, NSN will acquire Motorola's incumbent relationships with over 50 operators apart from numerous state-of-the-art research and development centres and the latter's 7,500 employees.

However, Motorola has retained its iDEN business, which is a proprietary technology developed by the company that only Sprint-Nextel and Nextel International's affiliates use. Motorola will also retain all the patents related to its global wireless businesses. NSN will, however, have unlimited access to them through a perpetual cross-licence. The intellectual property rights have been retained as they bring value to Motorola's other businesses.

NSN plans to finance the deal from its existing reserves and financing agreements, and expects to complete the acquisition by end-2010, subject to customary closing conditions which include regulatory approval.

"This is an exciting acquisition which I believe will have significant benefits for our customers, employees and shareholders. We expect to gain an incumbent position with many new customers and strengthen our position with others," notes NSN CEO Rajeev Suri.

For NSN, which has been retrenching employees and closing offices globally to meet the fall in demand and price competition from rivals, this deal will bring it scale and reach. Analysts say that after failing to acquire Nortel's CDMA/LTE assets, Motorola was the last good bet for NSN to get a foothold in the North American market, where it had been lagging behind other mobile equipment suppliers.  Following the deal, the possibility of lucrative business relationships with Sprint, China Mobile, Clearwire, KDDI, Verizon Wireless and Vodafone will become stronger.

The acquisition will improve NSN's prospects in the wireless infrastructure space too. Adding Motorola's wireless RAN assets alone – which represented a turnover of $3.7 billion in 2009 – will put NSN in a better position to compete against Ericsson, Huawei and Alcatel-Lucent.

The transaction also marks NSN's entry into the CDMA business, with the company offering Motorola's extensive CDMA portfolio along with its wireless product range. Not only will this allow NSN to take on competition in the US market, it will also strengthen NSN's position in Japan. KDDI has been Motorola's long-standing CDMA customer and is now one of the two commercial LTE customers of Motorola, the other being NTT DOCOMO. With Japan's two major operators as its customers, NSN expects to be the largest foreign supplier in the Japanese market.

Given Motorala's large Wi-Max solutions portfolio (41 contracts in 21 countries), the deal marks NSN's comeback into the Wi-Max business too. It had been reselling Wi-Max solutions from Alvarion since its decision to stop in-house development of the product. However, in the future, analysts expect that it would make good business sense for NSN to get back into the Wi-Max space.

"As customers look to transition from CDMA networks to next-generation technologies, we will utilise the combined strength of NSN's TD-LTE solutions and Motorola's Wi-Max and LTE businesses to better meet customers' evolving technology and business needs," noted Bosco Novak, head of customer operations, NSN, in a media statement.

The deal is a positive leg-up for NSN. Based on revenue, after the addition of Motorola's wireless network infrastructure business, it expects to become the third  largest wireless infrastructure provider in the US, the first foreign wireless vendor

in Japan and the number two leader in the global infrastructure segment.

For Motorola, the sale of its networking unit is in line with its plan, made two years ago, to spin off its mobile handset and telecom equipment manufacturing business into two separate entities. It has taken some time to implement the plan but as Greg Brown, the company's co-chief executive, points out, "The sale of the unit will help put the company's plan into motion, allowing us to move unfettered, full steam ahead."

Following the acquisition, Motorola will put all its energies into sharpening its strategic focus. It is preparing to split into two separate companies – Motorola Mobility, which includes its handset and set-top box units, and Motorola Solutions, which, after the deal closes, will comprise its enterprise mobility division.

"The deal repositions Motorola Solutions as a pure-play public safety and enterprise mobility provider," says Brown. As far as the Motorola Mobility unit is concerned, after several years, it looks like it is undergoing a revival under the leadership of Motorola co-chief executive Sanjay Jha, who has led the growth with the launch of the android line of smartphones.