Research in Motion is calling on the federal government to review the auction of Nortel Networks’ assets, claiming it was shut out of bidding for the troubled network hardware maker’s wireless properties.
Jim Balsillie, co-CEO of the BlackBerry maker, said his company was prepared to put down as much as US$1.1 billion for Nortel’s code division multiple access (CDMA)and Long Term Evolution (LTE) businesses, but restrictive conditions levelled on RIM’s bid is preventing the company from keeping Nortel’s assets in Canadian hands.
On June 19, Nokia Siemens Networks offered US$650 million for Nortel’s carrier wireless assets, but comparing this to RIM’s bid is not an “apples to apples” comparison, said Mark Tauschek, lead analyst with London, Ont.-based Info-Tech Research Group.
He was referring to the statement in a Research in Motion press release that the Waterloo, Ont. company is seeking, in addition to Nortel’s CDMA and LTE business, “certain other Nortel assets.”
It was not immediately clear what those “certain other” assets are.
“They’re probably trying to buy some intellectual property in conjunction with it,” Tauschek said.
Another Canadian analyst agreed.
“I think really the main driver there for RIM is for the intellectual property rights rather than the core of the business,” said Ronald Gruia, the Toronto-based program leader for enterprise telecom at Frost & Sullivan. “Companies are hardly flocking to the base station market.”
Dave Sherry, president of Newmarket, Ont.-based Unity Telecom, resells Nortel equipment. He said it’s possible some may be concerned RIM would use Nortel’s carrier wireless technology to dominate the wireless services market.
“Unless it is something around owning the back room and owning the end points, (giving RIM) a different advantage over someone else, I don’t see why (Nortel) wouldn’t go for that,” he said. “I’m sure there are lots of legal reasons and the courts have their things that they do.”
RIM believes its offer would result in an “extremely attractive price” for Nortel creditors and value substantially in excess of the stalking horse bid made by Nokia Siemens Networks, a RIM statement issued late Monday night said.
“It’s encouraging a technology leader in Canada is interested in investing” in Nortel, said Brownlee Thomas, Montreal-based principal analyst at Forrester Research. “That promises hope for the Canadian employees of Nortel.”
Despite its efforts to bid for Nortel assets, “RIM has found itself blocked at every turn,” Balsillie stated in the press release. A RIM spokesperson said its executives were travelling Tuesday and not available to comment.
In its statement, RIM said it sought to be considered as a qualified bidder in the auction for Nortel’s wireless business but was told it would only qualify if it pledged not to submit offers for other Nortel assets for a year.
“In seeking to impose this condition, Nortel and its advisers were fully aware of RIM’s desire to purchase other Nortel assets as part of a solution to retain key portions of Nortel’s business under Canadian ownership” the statement said. “Despite repeated efforts, Nortel, its advisers and its court-appointed monitor have rejected RIM’s repeated attempts in meaningful discussions.”
Nortel spokesperson Ryan Hill said RIM’s bid was rejected because RIM refused to sign a confidentiality agreement that Nokia Siemens Networks was willing to sign as a condition for have its bid accepted.
RIM also has concerns about national security, but was not specific.
“RIM believes that the loss of Canadian ownership of Nortel’s CDMA and Long Term Evolution Access businesses may significantly, adversely affect national interests, with potential national security implications, and that the Government of Canada should review the situation closely,” the company stated in a press release.
RIM’s statement also pointed out that the Nokia Siemens bid is propped up by a multi-million dollar loan from the government.
“RIM is extremely disappointed that Nortel’s world leading technology, the development of which has been funded in part by Canadian taxpayers, seems destined to leave Canada and that Canada’s own Export Development Corporation is preparing to help by lending $300 million to another bidder,” the statement quoted Balsillie as saying.
An Industry Canada spokesperson said his department is following the discussions closely and e-mailed a statement from the department attributed to Tony Clement, the federal industry minister.
“As Nortel is in bankruptcy protection, the Government of Canada does not have a say (in) how the Judge rules on any proposed sale of Nortel assets,” Clement said in the written statement.
Hill said Nortel would not comment on the national security claim. Gruia suspects RIM was talking about provisions in the Investment Canada Act, which requires Industry Canada to review the bids by non-Canadians to acquire Canadian firms meeting certain criteria. In the cases of members of the World Trade Organization, acquisitions exceeding $312 million would be reviewed.
It was not clear, however, how an acquisition by Nokia Siemens Networks of Nortel’s CDMA and LTE business would compromise national security.
“I think that’s a little bit of nonsense from Balsillie,” Tauschek said, adding LTE is a standard and CDMA is proprietary to Qualcomm. “There are certainly really no secrets around the technology.”
A Nokia Siemens Networks spokesperson would not comment on RIM’s claims that their acquisition could have “national security” implications.
“We do believe that our offer is in the best interest of employees and customers in Canada,” said Chantal Boeckman, communications manager at Nokia Siemens Networks. “Time is of the essence for these assets. We’re in a position to close the deal.”
With files from Jeff Jedras
