Nortel, Huawei in Broadband Venture

Nortel (NT) signed a memorandum of understanding to form a joint venture with Huawei Technologies for developing ultra broadband access solutions for markets around the world.

Toronto-based Nortel said the two companies have also entered into a supply agreement that allows Nortel to immediately begin engaging customers with Huawei's current industry-leading broadband access portfolio.

The new company will combine Huawei's market leading broadband access solutions with Nortel's voice and broadband networking technologies to create a new product portfolio designed to be a leader in the industry in value and performance. These products will give service providers the ability to converge the delivery of voice, video, data and wireless services to business and residential customers onto a common IP platform that supports copper, fiber and fixed wireless networks.

The parties intend that the joint venture will be majority-owned by Nortel and headquartered in Ottawa. The joint venture will be focused on product enhancements for Huawei's current broadband access portfolio and the development of a new ultra broadband product portfolio. This portfolio will be sold exclusively to Huawei and Nortel as channel providers.

"We believe the cooperation with Nortel, a leader in the telecommunications industry, will enable us to create greater value for our customers." expressed Yafang Sun, chairwoman of Huawei. "The joint venture will combine Huawei and Nortel's advanced technologies and products to create leading broadband access solutions to meet customers' needs. It will bring better value to our existing and potential customers."

"Nortel is focused on seizing opportunities that will generate new revenue and expand operating margin. This joint venture is a bold opportunity to combine the strengths of Huawei and Nortel into a company that can aggressively target and win share in the rapidly expanding ultra broadband market," said Mike Zafirovski, Nortel president and CEO. "This will create a powerful new player in what is a high growth market."

Nortel and Huawei expect to complete the formation of the joint venture in the third quarter of 2006. Joint development of products has already begun, with availability expected for all markets by the third quarter of 2006.

The proposed joint venture is subject to execution of definitive agreements and customary regulatory approvals.

In 2003, Huawei Technologies and 3Com (COMS) formed a joint venture company, 3Com-Huawei, to focus on the R&D, production and sales of data networking products.

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