25 October 2005 Ericsson has confirmed that it will acquire most of beleaguered telecoms equipment manufacturer Marconi in a £1.2 billion deal, to boost its position in the fixed line and wireless Internet market.

Ericsson said it will purchase all of Marconi’s network equipment business, including its data networking business in the UK. Marconi, however, will retain its UK services business and will continue trading as an independent entity known as Telent.

“The acquisition of the Marconi businesses has a compelling strategic logic and is a robust financial case. As fixed and mobile services converge, our customers will substantially benefit from this powerful combination,” said Carl-Henric Svanberg, President and CEO of Ericsson.

The deal ends months of speculation as the embattled British-based Marconi – a one time giant of the telecoms industry – has seen its fortune decline. This culminated in its failure to win any part of BT’s £10 billion 21st Century Network contract, losing out to Ericsson and Huawei in the process.

Jean-Charles Doineau, research director at analyst house Ovum said the pieces bought by Ericsson makes sense in a mobile environment, making Marconi a good acquisition for Ericsson. “Buying some of Marconi’s assets, Ericsson complements its product portfolio in areas which will be of a very strategic importance for mobile operators and for convergent network operators, at the same time,” he said.

The Ericsson acquisition brings the axe down on the troubled Marconi name – 108 years after the company sent the first wireless message. It narrowly fought off bankruptcy and has struggled to find direction after making several large, badly miscalculated dot-com acquisitions.

The deal will, however, help fill the £700 million shortfall that was subsequently created in the Marconi pension fund.