Another blow for Alcatel
The deal will most directly hurt Alcatel-Lucent, the market leader in CDMA technology, which will miss an opportunity to gain share.

"It is a negative for Alcatel-Lucent," said Bernstein analyst Pierre Ferragu, adding that Ericsson and NSN were likely to capture a greater share of the CDMA footprint.

Nortel saw its market share in CDMA business declining to 22.8 percent in January-March quarter from 35.3 percent in the same quarter a year earlier. Its overall global market share halved to 4 percent, according to research firm Dell'Oro.

Alcatel-Lucent dominates the CDMA market with a roughly 40 percent stake.

The telecom equipment industry is consolidating and leaving only a few global players -- market leader Ericsson (ERICb.ST), aggressive newcomer Huawei HWT.UL, Nokia Siemens and Alcatel-Lucent.

The market has seen cut-throat competition for new business during the past few years, driven by Asian vendors, and the outlook remains tough. Alcatel-Lucent has forecast the market to shrink 8-12 percent in 2009, while Nokia Siemens has said the market would fall some 10 percent.

Both Nokia Siemens and Nortel have seen their market share shrinking fast as both have shied away from the toughest price wars.

In an industry where changes in market shares have been slow and small, the two firms combined saw their market share shrinking to 25 percent in the first quarter, from 32 percent a year earlier, according to research firm Dell'Oro.

Nortel, once the largest North American maker of telecommunications gear, filed for Chapter 11 bankruptcy protection in U.S. federal court and for creditor protection in Canada's Ontario Superior Court of Justice in January.

In spite of all the problems, Nortel's Carrier Networks unit -- which includes the parts Nokia Siemens is buying -- reported last year underlying operating profit (EBIT) margin rising to 20.1 percent from 18.7 percent.

Nokia Siemens made another loss in January-March. It has earlier said it aims to reach an underlying EBIT margin of 10 percent.