Nortel Deflects Verizon, Avaya Deal Moves Ahead

Nortel’s $900 million deal to sell off its Enterprise business assets to Avaya is moving forward. Late Wednesday, U.S Bankruptcy Court judge Kevin Gross issued an order authorizing and approving the sale.

Avaya was named the winner of the Nortel Enterprise auction earlier this week. The Nortel division has been up for sale since July when Avaya entered its first bid.

The deal had been facing opposition from Verizon, on the grounds that the sale would impact U.S national security interests. Verizon is a Nortel customer and they were concerned that a sell-off would impact the support agreements the two companies currently have.

Verizon’s opposition to the deal could potentially have delayed or derailed the Avaya Nortel deal, but that is no longer the case.

In court documents filed by Nortel in response to Verizon’s opposition, Nortel struck out at Verizon’s opposition as being one influenced by money.

“Here, the potential rejection of Verizon’s contracts is nothing but an economic matter for a wealthy company,” Nortel stated in its legal filing response. “Verizon has the resources, the wherewithal and most importantly, the alternate suppliers to service its customers in the event of rejection.”

Joel Hackney, Nortel’s president of Enterprise Solutions stated on Monday during a press conference call that Nortel did not expect Verizon’s opposition to hinder the deal. Additionally he noted that Nortel was committed to supporting customers.

For its part, Verizon is still working towards ensuring that their Nortel equipment is supported under Avaya’s ownership.

“We will continue to negotiate with Avaya to establish appropriate terms under which they will support legacy Nortel equipment following the close of Avaya’s purchase of the Nortel enterprise business,” Verizon spokesperson David Fish wrote in an email to InternetNews.com. “Business operations between Nortel and Verizon remain unchanged in the immediate term.”

A few final steps

With the U.S Bankruptcy court approval of the enterprise division sale, there are still a few steps before the deal officially closes.

“In addition to U.S., Canadian, and any other required court and regulatory approvals, consummation of the Enterprise Solutions transaction is subject to the satisfaction of customary closing conditions,” Nortel spokesperson Pat Cooper wrote in an email to InternetNews.com. “We anticipate closure during late Q4, 2009.”

Nortel has been in bankruptcy protection since the beginning of the year and has been selling off its assets ever since.

The Enterprise division sell-off follows the court approval to sell-off other Nortel divisions. In July, Nortel sold off its wireless CDMA and LTE assets to Ericsson in a deal worth $1.13 billion.