Yesterday, I had posted a story on LG Electronics' strong performance in 3G wireless handsets.  At the end of the piece, I mentioned an article that I came across Telecoms Korea talking about a potential deal involving LGE selling its communications unit to either Nortel or Cisco (I discovered the original article on Tuesday this week, but could not find any official news item on Google News or any other source).

Well, today, someone e-mailed me a Dow Jones Newswires story claiming that that rumor is now official: LGE will spin-off its telecommunications unit and establish a JV with Nortel:

S Korea LG Elec To Set Up Telecom JV With Nortel - Report

SEOUL -(Dow Jones)- South Korea's LG Electronics Inc. (066570.SE) plans to spin off its telecommunications equipment operations and set up a joint venture with Nortel Networks Corp. (NT.T) of Canada, reports online news provider edaily.

The two companies plan to sign a memorandum of understanding and finalize details by the end of this year, edaily reports, quoting an LG Electronics official.

LG Electronics' telecommunications equipment business posted a loss of more than 70 billion won ($1=KRW1,148) in 2002, but last year the business turned profitable to post a net profit of more than KRW50 billion, edaily says.

A spokeswoman at LG Electronics said she couldn't immediately confirm the report.

At 0517 GMT, shares of LG Electronics were 1.5%, or KRW900, higher at KRW62,000, outperforming the broader market's 0.4% drop.

LG Electronics also makes mobile handsets, home appliances and plasma display panel televisions.


-By Seoul Bureau, Dow Jones Newswires; 822-732-2165; djnews.seoul@dowjones.com

Interesting news item - but it is still early to jump to any conclusions until more details are announced.  For instance, I wonder if the JV will or will not include the 3G handset part of the LGE communications organization (the original report mentioned specifically that the 3G operation would not be a part of the JV exercise).  If so, then the deal makes sense for Nortel, since the company is actively competing in the 3G space, and this can create some synergies (e.g. Hutchison 3, a leading W-CDMA operator). 

However, speculatively speaking, there will be some duplication in the enterprise division (in terms of the LGE KTS and PBX, as well as the interest in KTS vendor Vodavi).  I would imagine LGE would keep its enterprise product lines and sell them in Korea and APAC (except possibly for Australia and other areas where Nortel is strong).  Nortel would still use its enterprise product lines in the remaining regions around the world.  Again, the information is still very fluid, so it is early to make too many conclusions.

Note: The story originally appeared on Edaily, a respected Korean publication.  Since I don't speak Korean, I tried searching for LG in the text and found the article.  Then, finding an online Korean to English translation tool was difficult (Google's language tools currently do not include support for Korean-to-English translation).  Altavista does have such an engine, albeit the translation is not the best (I guess the engine is still a work in progress).  But here it is, in any event.  The URL is:

http://www.edaily.co.kr/news/exclusive/read.asp?newsid=02102486573423072&strPage=1&curtype=read

(scroll down to "Traduci una pagina web" and copy and paste the above URL).  Then, choose "da Coreano a Inglese" on the combo box and click on the button that says "Traduci".