Nortel, Huawei to Establish Joint Venture to Address Broadband Access Market
Plan to Jointly Develop Ultra Broadband Products for Delivery of Converged Services
FEBRUARY 01, 2006, TORONTO -Nortel* [NYSE/TSX: NT] and Huawei Technologies Co., Ltd. (“Huawei”) announced they have entered into a Memorandum of Understanding (MoU) with the intent to establish a joint venture for developing ultra broadband access solutions for markets around the world. 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.
Total revenues for the global broadband access equipment market approached US$9 billion in 2005 and included a US$1 billion IP-DSLAM segment that is forecast to reach nearly US$2 billion in 2008 according to Dell’Oro Group. Huawei is ranked as the world’s number one vendor of IP-DSLAM ports for the last seven quarters and currently holds the number one and number two position for BB-DLC voice and DSL ports respectively. (Infonetics, Q3 2005)
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, president and CEO, Nortel. “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.
About Huawei Technologies
Huawei Technologies is a leader in providing next generation networks for telecommunications operators around the world. The company is committed to providing innovative and customized products, services and solutions to create long-term value and potential growth for our customers. Huawei’s products and solutions are deployed in over 100 countries and serving 28 of the world’s top 50 operators, as well as over one billion users worldwide. For more information, please visit www.huawei.com.**
Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world’s most critical information. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world’s greatest challenges. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.
Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the outcome of regulatory and criminal investigations and civil litigation actions related to Nortel’s restatements and the impact any resulting legal judgments, settlements, penalties and expenses could have on Nortel’s results of operations, financial condition and liquidity, and any related potential dilution of Nortel’s common shares; the findings of Nortel’s independent review and implementation of recommended remedial measures; the outcome of the ongoing independent review with respect to revenues for specific identified transactions, which review will have a particular emphasis on the underlying conduct that led to the initial recognition of these revenues; the restatement or revisions of Nortel’s previously announced or filed financial results and resulting negative publicity; the existence of material weaknesses in Nortel’s internal control over financial reporting and the conclusion of Nortel’s management and independent auditor that Nortel’s internal control over financial reporting is ineffective, which could continue to impact Nortel’s ability to report its results of operations and financial condition accurately and in a timely manner; the impact of Nortel’s and NNL’s failure to timely file their financial statements and related periodic reports, including Nortel’s inability to access its shelf registration statement filed with the United States Securities and Exchange Commission (SEC); the impact of management changes, including the termination for cause of Nortel’s former CEO, CFO and Controller in April 2004; the sufficiency of Nortel’s restructuring activities, including the work plan announced on August 19, 2004 as updated on September 30, 2004 and December 14, 2004, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; cautious or reduced spending by Nortel’s customers; increased consolidation among Nortel’s customers and the loss of customers in certain markets; fluctuations in Nortel’s operating results and general industry, economic and market conditions and growth rates; fluctuations in Nortel’s cash flow, level of outstanding debt and current debt ratings; Nortel’s monitoring of the capital markets for opportunities to improve its capital structure and financial flexibility; Nortel’s ability to recruit and retain qualified employees; the use of cash collateral to support Nortel’s normal course business activities; the dependence on Nortel’s subsidiaries for funding; the impact of Nortel’s defined benefit plans and deferred tax assets on results of operations and Nortel’s cash flow; the adverse resolution of class actions, litigation in the ordinary course of business, intellectual property disputes and similar matters; Nortel’s dependence on new product development and its ability to predict market demand for particular products; Nortel’s ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization and consolidation in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of Nortel’s customers and the impact of customer financing and commitments; general stock market volatility; negative developments associated with Nortel’s supply contracts and contract manufacturing agreements, including as a result of using a sole supplier for a key component of certain optical networks solutions; the impact of Nortel’s supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; any undetected product defects, errors or failures; the future success of Nortel’s strategic alliances; and certain restrictions on how Nortel and its president and chief executive officer conduct business. For additional information with respect to certain of these and other factors, see the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed by Nortel with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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