Analyst says feds don’t want to intervene on Nortel

TORONTO — The Harper government is looking for an excuse to avoid intervening in the US$1.1-billion sale of Nortel Network’s (TSX:NT) wireless assets to Swedish firm Ericsson by valuing the assets at a fraction of the sale price, a long-time Nortel watcher says.

TORONTO — The Harper government is looking for an excuse to avoid intervening in the US$1.1-billion sale of Nortel Network’s (TSX:NT) wireless assets to Swedish firm Ericsson by valuing the assets at a fraction of the sale price, a long-time Nortel watcher says.

A published report Wednesday said the sale of Nortel’s wireless technology would be evaluated by the federal government based on the $149 million balance sheet value of its assets, far too low to trigger a review under the Investment Canada Act.

“It’s not a particularly good excuse,” said Duncan Stewart, director of research and analysis at DSAM Consulting.

“I think they’re picking the book value one as a way of avoiding saying something that is politically harder to say.”

Investment Canada has a C$312-million threshold for a full-scale review of a sale, but new rules approved by cabinet would change the evaluation to “enterprise value” which includes intellectual property and employees.

Jack Mintz, who holds the Palmer Chair in Public Policy at the University of Calgary, said the government can’t start using the new rules to value the Nortel sale because the regulations haven’t been put in place yet.

“Then they’d be looking like they’re manipulating the process,” said Mintz.

“This is actually quite common in a lot of acquisitions, where you could get substantial gains over the actual book value.”

If the enterprise value were used, the Nortel sale to Ericsson would certainly surpass the threshold for a review, said Stewart.

“The government is positioning itself so it can say we are not reviewing this because it doesn’t fall above a certain threshold,” he said.

“And it’s an easy way out. that way they don’t have to make judgment calls.”

Stewart said the Tory government faced a bit of a dilemma because blocking the sale would upset Ericsson, a global company with major investments in Canada, but supporting it would upset Research in Motion (TSX:RIM), which also wants the Nortel assets.

“If you say ’sorry, our hands are tied,’ you avoid making enemies,” said Stewart.

Industry Minister Tony Clement’s office declined comment Wednesday on the Nortel valuation, and said the government was still waiting for the court process to be completed, including any possible appeals.

RIM issued a statement Wednesday calling on Clement to “examine very carefully” how the Investment Canada Act applies to the sale.

“It is clear that Canadians overwhelmingly want the government to keep Nortel’s advanced technology in Canada, and expect the government to act,” the company said.

Mintz dismissed the argument that Canadian taxpayers paid for the technology developed by Nortel, noting that international giants like IBM also benefited from research and development tax credits.

“In the 1990s, IBM was second to Nortel in the use of the R-and-D tax credit, and so would we block a bulk purchase of R-and-D in Canada that IBM owned,” wondered Mintz. “We’d end up being the laughing stock of the world.”

Just Posted

PHOTO: Rainbow Block Party at Red Deer’s West Park

The Trans and Non-Binary Aid Society hosted a Rainbow Block Party at… Continue reading

Blood donations needed in Central Alberta: Canadian Blood Services

357 donors are needed before Aug. 26 at the Red Deer clinic

WATCH: Annual Family Picnic at Central Spray and Play

Blue Grass Sod Farms Ltd. held the Annual Family Picnic at the… Continue reading

Photos: Smoky conditions in Red Deer

Red Deer and area is experiencing high risk air quality.See related: Red… Continue reading

Committee to decide how millions in Humboldt Broncos donations are split

SASKATOON — Lawyers for the families of some of those who died… Continue reading

Boy, 11, dies after being struck by payloader on southern Alberta ranch

BOW ISLAND, Alta. — A boy has died after an accident on… Continue reading

Liberals look at creating federal holiday to mark legacy of residential schools

OTTAWA — The federal Liberal government wants to establish a holiday to… Continue reading

Thousands of police officers expected at regimental funeral in Fredericton

FREDERICTON — Thousands of police officers and first responders from across the… Continue reading

B.C. declares state of emergency over wildfires

VICTORIA — The British Columbia government has declared a provincial state of… Continue reading

As service refusals make headlines, experts say businesses usually in the wrong

Two Canadian businesses that recently made headlines for refusing customers have learned… Continue reading

Irregular asylum claims increased in July after two months of decline

OTTAWA — The number of irregular border crossers in Canada went up… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month