With federal government approval of the sale of Nortel Networks‘ wireless assets to Sweden’s Ericsson still pending and the sale of the enterprise business proceeding with a stalking-horse bid by Avaya Networks, parliamentarians are poised to give closer scrutiny to the break-up of the one-time lynch-pin of Canada’s IT industry.
The House of Commons Industry Committee, chaired by Conservative MP Michael Chong, will return to Ottawa for a rare summer meeting, scheduling an emergency meeting for Friday to examine the sale of Nortel’s assets. Representatives from Ericsson, Research in Motion and Nortel are expected to appear, as well as representatives from Industry Canada. The hearings are expected to be televised live on CPAC, and online.
Just prior to Ericsson winning a bankruptcy court-supervised auction process for Nortel’s wireless business with a $1.13B bid, RIM issued a press release complaining it had been unfairly excluded from the auction process, and calling for federal government intervention in the sale process, also citing national security considerations.
At the time, the prospect of government intervention was downplayed by Industry Minister Tony Clement.
“As Nortel is in bankruptcy protection, the Government of Canada does not have a say how the Judge rules on any proposed sale of Nortel assets,” said Clement in a statement. “This government wants to see Canada’s high tech sector thrive. It would be inappropriate to speculate on any future actions that Nortel may choose to undertake under the Companies’ Creditors Arrangements Act (CCAA) process.”
Following the announcement of the committee hearings, RIM declined an interview request from CDN, issuing the following statement:
“RIM has been invited to appear before the Industry Committee and welcomes the opportunity to explain some of the implications of the proposed Nortel deal to members of Parliament.”
Courts in the U.S. and Canada have approved the Ericsson sale, but the sale can still be reviewed and blocked by the Canadian government under the Investment Canada act. And Clement has been facing a growing chorus of critics urging him to do just that.
Federal opposition politicians have been calling on Clement to take a closer look at the break-up of Nortel. Liberal leader Michael Ignatieff wrote an open letter to Prime Minister Stephen Harper asking him to scrutinize the deal, noting the taxpayer dollars invested through R&D credits to develop Nortel’s intellectual property assets, while NDP industry critic Brian Masse called the use of taxpayer dollars to help fund the sale “outrageous.”
Also, Ontario finance minister Dwight Duncan urged the government to do whatever it can to block the deal and ensure Nortel’s next-generation LTE (long-term evolution) assets remain under Canadian control and that jobs are protected.
While Friday’s hearings will allow the issues surrounding the sale to be aired and parliamentarians to hear from the parties involved and get more information, in the end the committee’s work will be advisory only. The final decision on whether or not the government will intervene to block the Nortel sales rests with the Industry Minister, Clement.
The committee hearings are a good, if belated, step toward the government doing something on the Nortel file said Carmi Levy, an independent technology analyst based in London, Ont. But he added the fact an emergency meeting had to be called shows Canada lacks a proper policy framework and process to manage sales of this type and to guide crucial industries such as IT.
“Right now, Canada is just a passive player in this and something needs to change,” said Levy.
With the final decision resting with the industry minister the hearings could fall victim to political posturing, but with a minority government, Levy said if the government fails to act on Nortel it could hold consequences for the Conservatives down the road.
Were he a betting man, however, Levy said he’d be betting on Clement blocking the Ericsson sale in favour of a Canadian buyer, such as RIM.
“Do we want to be a leader in the technology sector, or do we want to be followers? (Without action) we’ll ultimately be a branch office, a technological backwater, and not a driver of tomorrow’s economy.” said Levy. “I think the government has no choice but to get involved.”