Time is not on Nortel’s side: An appeal to the US, EU, and Cdn Govt’s to expedite the process

by Guest on September 17, 2009

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The future of Nortel is now in the hands of the Canadian and EU governments, as well as the US Department of Justice.

The objections from Verizon have been rejected, but the fate of Nortel is still in limbo waiting for regulatory approval, and it’s important for the regulators to realize that the waiting will only hurt the sale process.  If any individuals reading this blog have a say in the regulatory process, please step in now to help ensure the sale of this potentially diminishing asset.

The DoJ needs to determine how to measure the marketing power that this integration creates.  If they look at the whole North American market, including small and mid-sized products, the impact isn’t as severe.  But if you “slice and dice” (a term used by Gruia) up the market into the various segments, and examine it on a product-by-product basis, Avaya, Nortel, and Cisco are clearly the dominant players in the large enterprise arena.  And with the Avaya/Nortel combination resulting in over 42% of the contact centre product’s market, dangerously close to the key threshold level of 43%, some analysts feel that the antitrust regulators will require Avaya to sell off assets to gain approval.

 “The key issue is the DoJ rubber stamp,” according to Ronald Gruia (analyst for Frost & Sullivan).  And the longer it takes to get the approval, the bigger the chance there is that the existing Nortel customers will seek other vendors through RFP’s.  Gruia explains that Avaya can walk away from the entire deal if they don’t meet the regulatory requirements.  

“The more pain for the customers the more likely it is they will take it to an RFP” said Gruia.

This issue could prove problematic moving forward.   The channel, customers, employees need some certainty with regards to direction, and the “dark cloud” hanging over the deal’s head and uncertainty it brings will make it difficult for Nortel to continue the sales momentum moving forward.   It looks like Nortel’s asset will rapidly decline in the next 6 months as their current customer base erodes and the dealer channel awaits a final seal of approval.

Avaya has set aside US$15 million for employee retention, which should provide some comfort to the 3100+ employees that are waiting for the sale to go through, but neither Avaya nor Nortel have released how many of the jobs will be kept after the sale. But if the sale doesn’t go through soon, or if the regulations are too prohibitive, Avaya will win, and Canada loses.

Some good news, the Canadian government has declared that they will not be blocking the sale of Nortel’s wireless division to LM Ericsson of Sweden, claiming that the agreement will be beneficial to Canada.  Since the Liberal government has announced that they have the same position on the Avaya deal as they did on the Ericsson acquisition, another roadblock might be soon removed.

The US and Canadian governments have approved the bankruptcy sale, but there are still a lot of “If’s” in this development: If Avaya is forced to sell off the Nortel Symposium products, and If the DoJ looks at the market in individual segments, and If the Canadian government decides to block the sale – but It’s hard to say what will happen because no one really knows.  And the waiting game will only make it more difficult.

The combination of an indecisive Canadian government and an unrealistic, overly protective American government might delay this process unnecessarily. So, hurry up the process and get this approved !

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Written by: Jason Finnerty. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Identi.ca, or Friendfeed

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Avaya Nortel, Nortel Avaya. Which one is it ? And what happens to your old Nortel equipment ? — TheTelecomBlog.com
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