LG, Nortel agree to joint venture

LG Electronics Inc. and Nortel Corp. signed a contract yesterday in Seoul to establish a joint venture to develop telecommunications equipment and networking solutions. The joint venture, tentatively named LG-Nortel Co., will open by the end of this year. The new entity will combine Nortel Korea’s distribution and service businesses and LG Electronics’ telecommunications infrastructure businesses. Canada-based Nortel will own 50 percent plus one share in the joint venture, while LG will own 50 percent minus one share. Nortel will pay $145 million. LG will contribute its telecommunication infrastructure business, valued at 300 billion won ($294.7 million) by both companies. LG will also receive additional payments for two years based on the joint venture’s performance. The two companies are planning to nominate Lee Jae-ryung, vice president of LG Electronics, as the chief executive officer of the joint venture, and Paul House from Nortel as chief operating officer. Nortel will nominate three directors to the board and LG two. “Our relationship with LG better positions Nortel in the dynamic and growing Asia market, will expedite research and development and will benefit our global customers,” said Bill Owens, vice chairman and chief executive officer of Nortel. The two companies are to enter domestic and foreign telecommunications equipment markets together. Kim Ssang-su, vice chairman of LG Electronics, said his company will devote its energy to developing mobile phones, with LG-Nortel handling telecommunications infrastructure. by Lee Hee-sung, Park Sung-ha