BREAKING NEWS: Politicians query Nortel, Ericsson

Federal Members of Parliament Friday are scheduled to interview officials from Nortel Networks Corp., LM Ericsson and Research in Motion over the proposed sale of Nortel’s carrier wireless assets.

IT World Canada will update this story as witnesses testify before the the emergency meeting of the Standing Committee on Industry, Science and Technology.

Ericsson last month agreed to buy the business unit of Nortel that manufactures products for wireless carriers using code division multiple access (CDMA) technology. Ericsson’s agreement resulted from an auction July 24, which was preceded by a stalking horse bid from Nokia Siemens Networks in June.


Nortel is trying to sell its business units and has been operating under bankruptcy protection since Jan. 14.

After Nokia Siemens Networks presented its bid, Waterloo, Ont.-based RIM complained it was effectively shut out of the auction process, and called on the federal government to review the sale. On July 20, RIM stated in a press release “the loss of Canadian ownership of Nortel’s CDMA and Long Term Evolution businesses may significantly, adversely affect national interests, with potential national security implications ….”


RIM did not elaborate, at that time, on what the national security implications were.

Ericsson’s purchase was approved by courts in the U.S. and Canada but is still subject to a review by Industry Canada because the Investment Canada Act requires a review of all purchases by foreigners of Canadian firms exceeding $312 million.

The Industry, Science and Technology committee is chaired by Michael Chong, member of parliament for Wellington-Halton Hills.

A member of Chong’s office staff told Network World Canada Friday’s emergency hearing “was requested through demand from a number of committee members.”

He said the members want to find out whether there are national security problem would result from Ericsson acquiring Nortel assets and whether the deal meets the “net benefit test” of the Investment Canada Act. Liberal leader Michael Ignatieff wrote an open letter July 27 to Prime Minister Stephen Harper asking for a “full review” of the sale of “to make sure the transaction is in Canada’s interest” and “to ensure that the intellectual property developed with the investment of taxpayers’ dollars continues to benefit us all.”

The letter did not specify which investment he was referring to. Ignatieff’s spokesperson, Michael O`Shaughnessy, did not answer a question from Network World Canada asking how much money Ignatieff was referring to and when it was spent. In an e-mail, O`Shaughnessy would only say it refers to tax credits under the Scientific Research and Experimental Development program and “assistance provided by Export Development Canada.”

In order for Nortel to have benefitted from the SRED program, it would have had to owe income tax to the government, and in order to owe tax, it would have to have had income. Nortel has lost money 10 of the last 11 years.

The committee members include: Liberal MPs Anthony Rota, Marc Garneau and Siobhan Coady; Conservative MPs Mike Lake, Gordon Brown and Dave Van Kesteren; Brian Masse, New Democrat MP for Windsor West; and Robert Bouchard, Bloc Quebecois MP for Chicoutimi—Le Fjord.

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Jim Love, Chief Content Officer, IT World Canada

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