Nortel Patent Auction Benefits LTE Market

The decision by Nortel to sell its Long Term Evolution (LTE) patent portfolio could serve as a launch pad for companies planning to cash in on a market expected to undergo explosive growth in the coming years, according to iSuppli.

iSuppli forecasts that LTE subscribers will reach 274.4 million by 2014, managing a whopping CAGR of 276.9 percent, up from just 1.4 million subscribers in 2010 and virtually no subscribers in 2009.

“With Nortel’s decision to open its LTE patent portfolio to bidders, the market for LTE just became a lot more interesting. The acquisition of Nortel’s Intellectual Property (IP) could represent a coup for any company, as it could significantly reduce time to market, development costs and royalty exposure. It also potentially could yield a new serious competitor in the market, depending on who acquires the IP,” said Francis Sideco, iSuppli analyst.

Currently, among the major suppliers in the chipset landscape for LTE, only Qualcomm and ST-Ericsson are known to have sampled LTE chipsets. Meanwhile, Samsung Electronics and LG are known to be working on solutions for their captive handset businesses.

Who could benefit?

“Proven experience with licensing and royalties in 3G shows that having a strong IP position is essential to any company wishing to compete effectively and profitably in the wireless wide area networking market. This is true regardless of whether a company is an equipment manufacturer, a chipset supplier or even a mobile network operator,” said Sideco.

According to him, with Nortel holding more than 4,000 patents in its portfolio, including those that are essential to the LTE standard, acquiring this IP might be a launch pad for companies that could be planning to get into the LTE market, expanding their portfolio or reducing royalty exposure on future products.

iSuppli believes a number of companies could benefit from acquiring Nortel’s IP—whether or not they are actually bidding on the holdings. Broadcom, Intel, Infineon Technologies, Huawei, LG and Samsung are just a few companies that might be interested in the technology.

The research group also believes that Nortel at present is testing the waters to gauge if there is enough interest going around in the market for a buyer to snap up the company’s patents, or whether Nortel could achieve greater revenues by turning its portfolio into a licensing business.

“The real question here is whether interest in the auction exists—and if Nortel will be able to get as much as, or even more than, it obtained in 2009 for its CDMA patents, which yielded $1.1 billion,” concluded Sideco.

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