Canada Won't Stop Nortel-Ericsson Deal

TORONTO (AP) -- Canada's industry minister said Wednesday the government won't block the $1.1 billion sale of Nortel Networks' wireless division to Sweden's Ericsson.

Canada could have blocked the sale on national security grounds or in an Investment Canada review, which can be undertaken if the book value of the asset exceeds $292 million.

Industry Minister Tony Clement said there is no basis for a federal review on national security grounds and the book value of the assets is $170 million. In addition, Ericsson is planning to offer jobs to 800 Nortel workers in Canada.

"While this transaction is clearly not subject to review it is also evident that this deal is very beneficial to Canada," Clement said. "I should note that Ericsson has operations in Canada for over 56 years. It has invested over $2 billion dollars in research and development in Canada over the past 10 years and it employs over 1,900 Canadians."

He also said protectionism is the not the answer when the economy is trying to recover from a recession.

"If we change the rules for Nortel, then we subject ourselves to changed rules involving Canadian companies who are investing overseas," Clement said.

Clement noted that Ericsson is largely responsible for one of Canada's foremost wireless cellular systems and said its Canadian operations have contributed to over 300 patents to the scientific community.

Ericsson won an auction to buy the wireless division, which researches and develops products for advanced wireless telecom devices. It hopes to close the deal next month.

The Swedish company has said the deal to buy a majority of Nortel Networks' North American wireless business covers the older CDMA and newer LTE wireless businesses of Nortel's Carrier Networks unit.

Nortel, a former telecommunications equipment giant that at one point accounted for one-third of the market value on the entire Toronto Stock Exchange, filed for bankruptcy protection in Canada and the U.S. in January, one day before it was due to make a debt payment of $107 million.

The Canadian government's decision is sure to disappoint Canada-based BlackBerry maker Research in Motion, which has urged it to prevent the sale so it could buy the wireless division. RIM has said the transaction must be reviewed to ensure that Canada's national interests are met.

RIM also accused Nortel of imposing unfair conditions in the court-supervised auction of Nortel's assets and said it had been disqualified by a demand from Nortel that it agree not to acquire any other Nortel assets in a one-year period.

RIM has said it would be prepared to pay in the range of $1.1 billion for Nortel's newer LTE wireless business, which uses a wireless standard that's gaining acceptance in the market and would include patents useful for future development, and for its older Code-Division Multiple Access business, a wireless standard mostly used in the United States, along with other unspecified assets.

"RIM is disappointed by the government's decision but nonetheless resolved to continue investing in Canada's future and furthering RIM's global leadership in wireless innovation," the company said in an e-mailed statement.

Ontario Finance Minister Dwight Duncan has warned it would be a mistake to let Nortel's wireless technology go to a foreign company, and said it would endanger Canada's role as a world leader in telecommunications.

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