Nortel filed for Chapter 11 bankruptcy today, after its loss in the third quarter ballooned to $3.41 billion and 1,300 people had to be let go.

Today’s filings occurred in Canada, Europe and the United States. “I firmly believe these are the right steps toward a solution for our company. This process will enable Nortel to become the highly focused and financially sound communications leader it should be,” CEO and President Mike Zafirovski wrote on the company’s Website.

“Most importantly, Nortel is still very much in business and our commitment to customers remains unwavering. We will continue to invest in leading edge R&D,” he wrote. “I can assure you we explored every possible alternative, sought a variety of solutions and engaged in extensive consultation with our Board of Directors and many other experts.”

Nortel’s previous turnaround attempt, which began late in 2005, was unsuccessful because of the worsening global economy, the company stated.

The former Northern Telecom was not always in such bad shape. The company was considered a major player in areas such as VoIP, especially during the dot-com boom of the late 1990s, even while facing wireless hurdles.

New steps for Nortel may include selling various business units or receiving a capital investment as a way to go private, UBS analyst Maynard Um wrote today.

Specifically, “We believe an acquisition by Huawei would be negative for the European vendors as it would gain significant market access in North America and might also open the door for Verizon’s LTE vendor selection. However, this could lead to market repair in the fragmented optics market… But large M&A in the telco equipment industry have rarely led to margin improvement in the past,” he wrote.

Nor is an acquisition by Ericsson a good fit, Um added. UBS today rates Alcatel-Lucent as neutral and Ericsson as a “sell” opportunity.

Alcatel (Paris: CGEP.PA and NYSE: ALA) announced today that it has signed a non-binding Memorandum of Understanding with Nortel to acquire its UMTS radio access business (UTRAN) and related assets for USD 320 million. This is a key step in Alcatel’s strategy to further strengthen its UMTS market position, and thus expand its global leadership in broadband access.

With this deal, Alcatel should become one of the world’s largest suppliers of UMTS radio access solutions, and further reinforce its technology edge at a time when the UMTS market is expanding rapidly. The proposed acquisition would enhance Alcatel’s industry-leading mobile radio expertise and product portfolio with technology and products that enjoy strong recognition among leading operators such as the Vodafone and Orange groups. Alcatel also intends to benefit from significantly strengthened research and development capabilities, amongst the most advanced in the world, with the scale and know-how to lead innovation in broadband wireless access, especially in HSxPA and 3G Long-Term Evolution (3G LTE), fully leveraging Alcatel’s expertise in multi-standard radio solutions and Software Defined Radio (SDR) technology.

Under the transaction, Alcatel intends to acquire Nortel’s UMTS radio access technology and product portfolio, associated patents and tangible assets as well as customer contracts. It is anticipated that a significant majority of employees of Nortel’s UMTS access business, will be transferred to Alcatel.

Following the transaction, Alcatel would serve an additional fourteen UMTS customers around the world for a combined global footprint that amounts to one in four UMTS operators. Alcatel would also significantly reinforce its presence with Tier-1 operators, especially in world-leading 3G markets such as South Korea, Italy, Spain, France, and the UK. While strengthening its presence in developed mobile markets, the transaction would also put Alcatel in a unique position to serve the needs of major upcoming 3G markets, such as China and other key fast-growing regions, where the company already enjoys a strong GSM/EDGE footprint.

“The expertise of Nortel’s UMTS team is well-known. I am confident that the scale resulting from our combined forces (including those of Lucent, pending the conclusion of the merger) will pave the way for further success in the wireless market. We are clearly poised to become a strong number 3 in UMTS and HSxPA,” said Marc Rouanne, President of Alcatel’s mobile communications activities. “Combined with our strong GSM/EDGE position, our early leadership in WiMAX and our strong commitment to LTE, this acquisition will add further momentum to Alcatel’s broadband wireless access strategy. Through the contemplated merger with Lucent, the combined company will also enjoy a leading position in CDMA EV-DO, including a clear commitment to Rev C, thus offering the most comprehensive and innovative wireless access portfolio in the industry”, he added. “Together with our long-standing leadership in DSL, it makes us the partner of choice to assist our customers in their network transformation towards seamless broadband.”

“This deal will be a win-win for both companies and our customers,” said Richard Lowe, president, Mobility and Converged Core Networks, Nortel. “We will work closely with our UMTS access customers during the planned transition to make it as seamless as possible and will continue to provide the best support for other Nortel solutions deployed in their networks.”

The acquisition is subject to the execution of a definitive agreement and other closing conditions. The parties are targeting to complete the transaction in the fourth quarter of 2006.

Alcatel has and will continue to involve Lucent in the conclusion and implementation of this project in order to achieve the most efficient fit within the combined company.

Bouygues Telecom has selected Nortel as one of its suppliers for its national high-speed mobile internet and voice network. The advanced UMTS network, based on Nortel HSDPA technology, is being designed to provide customers in France with services such as high-quality live TV, high definition video on demand, MP3 streaming and multi-user mobile gaming when it goes live in early 2007. The new 5-year contract stipulates that Nortel is responsible for rolling out the network in 4 out of 6 of Bouygues Telecom’s operational regions in France; including the Western, South Western, Northeastern and Mediterranean regions.

“We have strong ties with Bouygues Telecom, having supplied their network from their first GSM implementation through to our EDGE solutions, and now we will help them take the important next step to 3.5G,” said Michel Clement, president of Southern Europe, Nortel. “Nortel’s HSDPA technology allows mobile operators to provide new real-time services that increase the end-user’s experience and helps build customer loyalty.”

Nortel is currently a key supplier of Bouygues’ EDGE and GPRS networks. The current infrastructure provides Bouygues Telecom with the appropriate foundation for the new network upgrade. It utilizes bandwidth more efficiently, which means it can relay cost-saving advantages to customers.

Nortel’s HSDPA solution can provide connectivity at speeds up to 7.2 Mbps. The company achieved the industry’s first HSDPA mobile call in January 2005. Nortel completed the first live test calls using a commercial handset solution for HSDPA in March 2005. In June 2005, Nortel became the first wireless network supplier to complete the TL9000 registration standard for Quality Management System Requirements and Measurements across its HSDPA, UMTS and GSM wireless infrastructure solutions.

In addition to Bouygues Telecom, Nortel has worked with a number of wireless operators on HSDPA deployments, including Orange France, Vodafone Spain in Barcelona (during 3GSM World Congress in February 2006), EDGE Wireless in the US, SKT and KTF in Korea, Partner Communications in Israel, and Mobilkom Austria.