Ericsson AB (ERICB), the world’s largest maker of wireless networks, increased its stake in a venture with LG Electronics Inc. (066570) to 75 percent to expand its presence in South Korea.
Ericsson boosted its share in Seoul-based LG-Ericsson from 50 percent, the Stockholm-based manufacturer said in a statement today, without disclosing financial details. Ericsson bought Nortel Networks Corp. (NRTLQ)’s share of LG-Nortel Co. (LGJVZ) in 2010 for $242 million in cash.
Ericsson had “basically no market share” in the mobile industry in South Korea, Asia’s third-largest market for wireless investments, before entering the partnership, Chief Executive Officer Hans Vestberg said last year. The Swedish company entered in time to gain contracts for so-called fourth- generation networks with all three major Korean operators, including the LG U+ brand controlled by Seoul-based partner LG.
“Korea is one of the top telecom markets globally so it’s a good market to be in,” said Haakan Wranne, a Stockholm-based analyst at Swedbank Markets. “It makes sense that they would strengthen their position, and now they will give back a little less in minorities to LG.”
Ericsson rose 0.5 percent to 67.5 kronor as of 10:20 a.m. in Stockholm. The additional stake will probably add less than 1 percent to earnings per share, Wranne said.
“We are very happy with the investment and our position in the Korean market, and that’s the rationale for increasing the stake,” Tobias Gyhlenius, an Ericsson spokesman, said by telephone. He declined to discuss the purchase price.
The carrying value of Ericsson’s 50 percent stake in the partnership was 1.94 billion kronor ($289.9 million) at the end of 2011, according to the Swedish company’s annual report.
The venture, which has 1,300 employees, sells Ericsson products and services in South Korea. About 700 of them work on research and development of third-generation and fourth- generation wireless technology, Gyhlenius said.
Revenue for LG-Ericsson was about $1.3 billion in 2008 as third-generation network buildouts peaked, and between $600 million and $650 million in 2009, Ericsson said in 2010. The Swedish company doesn’t report separate figures for consolidated businesses.
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