Business, Entertainment - Written Tuesday, August 11, 2009 by Don Tapscott - 1 Comment

Nortel assets should remain in Canada

Let’s hope the Canadian government has the wits about it to heed the good advice it is receiving concerning the possible sale of Nortel Networks Corp. assets to Swedish telecom giant Ericsson for $1.13 billion (U.S.).

Appearing recently before hearings of the House of Commons industry committee, Mike Lazaridis, co-chief executive of Waterloo, Ont.-based Research in Motion, urged the federal government to intervene to avoid the loss to foreign control of technology he called “a national treasure.”  RIM would like to acquire the assets.

He told Members of Parliament that allowing the sale to proceed and having Canadians lose control of Nortel’s next-generation wireless patents would be similar to Canada’s notorious decision to cancel development of the Avro Arrow aircraft in 1959.

Writing in the Globe and Mail, Roger Martin, dean of the Rotman School of Management at the University of Toronto and a member of the RIM board of directors, said the government didn’t appreciate how bare-knuckle the global marketplace can be.  He likened Canadians to being well-meaning but sometimes ineffectual boy scouts.

Bankrupt Nortel Networks Corp. is auctioning off its assets to pay what it can to creditors. A key component of those assets is valuable intellectual property related to the next-generation wireless standard, known as long-term evolution, or LTE. Those intellectual property assets were created by Nortel with millions of dollars of support from Canadian taxpayers through the Scientific Research Tax Credit program.

Sophisticated participants in the global wireless market who identified desirable intellectual property in Canadian hands came bidding for those assets with their chequebooks wide open. As a strategist, I absolutely would have encouraged them to do what they did. In the end, Swedish telecom giant Ericsson was the winner of the court-sponsored auction, gaining licensing rights to Nortel’s 125 LTE patents, though not ownership of the patents.

However, had crucial Swedish telecom intellectual property been up for sale instead, there would be no chance that any foreign company would have even have had a sniff at it, let alone get $300-million in financing for it (as Export Development Canada offered to Nokia Siemens Networks in its failed bid for the Nortel assets). And that’s because the Swedish economic policy leaders aren’t boy scouts.

The time is now – right now – for the Canadian government to step up to the plate and use the Investment Canada Act review provisions to demonstrate that, like the leaders of Canada’s great global companies, it has graduated from scout status to being a full partner in global competitiveness.

The sale should not proceed.