Swedish technology giant Ericsson has finalised a binding agreement to sell its US call-routing subsidiary iconectiv to Koch Equity Development.

The Swedish telecom-equipment manufacturer anticipates a net cash benefit of approximately Skr10.6bn ($1bn) from the transaction. 

This value is after accounting for anticipated taxes, transaction expenses, as well as other liabilities. 

In addition, the sale is expected to result in a one-time earnings before interest and taxes (EBIT) benefit of about Skr8.8bn for Ericsson upon closing.  

However, the completion of the deal is contingent on meeting customary closing conditions, including regulatory approvals. 

The deal is projected to conclude in the first half of next calendar year. 

iconectiv, which is consolidated and reported within Ericsson’s Segment Enterprise, contributed roughly Skr1bn to Ericsson’s 2023 net income.  

At the end of 2023, Ericsson had extended a shareholder loan to iconectiv amounting to Skr6.7bn. 

Acquired by Ericsson in 2012 as part of the Telcordia acquisition, iconectiv has been 16.7% owned by Francisco Partners since 2017.  

The company is a provider of number portability solutions and offers services in core network and operations management, numbering, along with data exchange, serving more than 5,000 customers across various sectors. 

According to Bloomberg, the sale aligns with Ericsson’s ongoing strategy to streamline operations and improve margins in a competitive telecom-equipment market.  

Both Ericsson and its Nordic rival Nokia have faced challenges due to lower-than-expected demand for 5G technology, the report noted.  

Ericsson had initiated the sales process for iconectiv in 2020, with initial valuations ranging from $1.5bn to $2bn, as reported by Bloomberg News at the time. 

Koch, a diverse conglomerate with investments in technology and growth equity, had previously expanded its tech portfolio by acquiring the remaining shares of cloud-software company Infor in 2020, in a transaction that valued Infor at $11bn.