Marconi has agreed to sell off the bulk of its assets to rival Ericsson today in a deal worth around £1.2 billion.

Ericsson beat off interest from Alcatel, of France, and Siemens, of Germany to acquire the stricken British telecoms equipment group.

The Swedish firm will acquire the Marconi trademark as well as a range of equipment-based operations, leaving the remainder of Marconi as a services provider to telecoms companies.

The deal includes an initial contribution of £185 million to protect 69,000 members of Marconi’s UK pension plan, which has a large deficit. A further £490 million will be left in an escrow account to take care of future pension liabilities.

Marconi currently employs around 9,000 people worldwide, with 2,000 staff in the UK set to be retained within the business not being acquired by Ericsson. That operation will be renamed Telent.

Shares in Marconi gained 3 per cent or 10.5p to 361.5p in morning deals. To track the stock click here.

Ericsson shares gained 1.5 per cent in early deals on the Swedish bourse to trade at SKr26.50.

Marconi’s fate was effectively sealed earlier this year when its largest customer, BT Group, omitted it from a list of key suppliers for a £10 billion re-fit of its network as part of the 21CN programme.

BT instead chose Ericsson to supply the i-node technology that will direct traffic over the new network. Marconi will now become Ericsson’s "preferred partner" to service this contract with the UK’s former monopoly telecoms operator.

"The acquisition of the Marconi businesses has a compelling strategic logic and is a robust financial case," Carl-Henric Svanberg, Ericsson’s chief executive, said.

What remains of Marconi will be left with a cash balance of £275 million, as well as responsibility for Marconi’s gaping pension deficit.

According to the latest figures, the Marconi pension fund covers 38,000 pensioners and more than 30,000 deferred pensions — workers who have moved to other employers and have yet to call on their pension benefits. Against this, there are fewer than 3,000 workers still contributing to the scheme.

Under last year’s Pensions Act, the new pensions regulator — currently David Norgrove — can demand that any company taking Marconi over must provide legally binding guarantees that all pension liabilities will be met.

After the pension issue has been addressed, Marconi said it plans to return 275p a share to investors in the first quarter of 2006.

Ericsson said the deal would help it expand its business in the market for converging fixed and mobile communications such as IP telephony. The Swedish It already dominates global sales of mobile equipment to operators.

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