An acquisition by Nokia Siemens Networks of Nortel Networks Corp.’s carrier wireless unit is probably the best-case scenario for Canada right now, according to a Toronto-based analyst.
“This is probably one of the best things that can happen for Canada in terms of R&D staying here and jobs staying here,” said Lawrence Surtees, vice-president and principal analyst of IDC’s Canadian communications practice. Surtees made his comments this week after Luca Maestri, chief financial officer of Nokia Siemens Networks, met with Canadian journalists and industry analysts in downtown Toronto.
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Maestri gave additional details on his company’s agreement, announced last month, to acquire for US$650 million than the Nortel intellectual property and facilities focused on the code division multiple access (CDMA) and Long Term Evolution (LTE) wireless technologies.
When it announced the agreement with Nokia Siemens Networks June 19, Nortel also said it is in advanced discussions with un-named vendors to sell off its other units. But Maestri said Thursday Nokia Siemens Networks is not seeking to buy any other Nortel assets.
The agreement is known as a “stalking horse” deal, meaning any other company could offer to buy the assets by July 24. If this happens, an auction will take place for the next 24 hours.
“If our bid prevails we think we can close in August, transfer money to the creditors, take over the assets, continue to run the business and so on,” Maestri said. “If something different emerges, then you’re going to have a delay because the bidder will have to go through the anti-trust process and all the regulatory processes which we are doing today.”
So far no other vendors have announced competing bids, and the deal with Nokia Siemens Networks is contingent upon the company offering jobs to at least 2,500 Nortel employees.
When it announced the agreement, Nokia Siemens Networks said it plans to keep “the majority” of current Nortel CDMA and LTE employees, meaning about 2,500 would be offered jobs with NSN, about one third whom would work in Canada.
The most significant part of the deal, Surtees said, is Nokia Siemens Networks’ plans to make Ottawa a “centre of excellence” for LTE.
“It’s the right thing for the employees because it’s a perfect strategic fit,” Maestri said Thursday. “We don’t have a presence in North America. It’s very good for Canada because we want to make Ottawa a centre of excellence for LTE technology, and it’s going to be a global centre.” If no other potential buyers come forward, the deal is still subject to approval from bankruptcy courts in Canada and the U.S.
Lawyers for the companies and creditors appeared in courts in Canada and the U.S. earlier this week. Maestri said there were 12 objections raised in court.
“Nine of them were ruled by the judge in our favour,” he said, adding for the other three, NSN “compromised” on “really really small stuff.”
Toronto-based Nortel filed for court protection from creditors Jan. 14, after losing more than US$7 billion since 2005. The company, which was founded in 1895 and dominated the Toronto stock exchange in 2000, has lost money every year, except 2006, since 1996.
When it announced the deal to sell its CDMA and LTE units to Nokia Siemens Networks, it said it was in “advanced discussions” to sell its other units, which include metropolitan Ethernet, plus the enterprise unit that makes voice and data networking products for enterprise customers.
The selloff of Nortel assets “something akin to ditching the Avro Arrow,” Surtees said, referring to the decision in 1959 by then Prime Minister John Diefenbaker to cancel a contract to purchase supersonic fighter airplanes designed in Canada to intercept enemy bombers.
“The billion dollar question for Canada is whether there is any way Nortel can be a going concern,” Surtees said. “To me it seems less likely as the days go by.”
Nortel announced plans to sell its metropolitan Ethernet division last year, but no buyers came forward. Metropolitan Ethernet encompasses optical networking technologies, which make up a significant part of Nortel’s business, Surtees noted.
Recent published reports indicated Avaya Inc. of Basking Ridge, N.J. is talking to Nortel about buying its enterprise unit, but the companies are not commenting publicly.
