The president and co-CEO of BlackBerry-maker Research in Motion said he had a handshake deal with Nortel to buy part of its wireless business before the deal was suddenly called off.
The companies were even emailing about the wording of a press release announcing the deal, Mike Lazaridis told a emergency parliamentary committee on Friday.
"We felt like we were snookered," Lazaridis said.
Ottawa called an emergency meeting to discuss the recent sale of Nortel Networks, hoping to clarify the controversial auction process that saw the Canadian company sold to the Swedish telecom company Ericsson late last month.
In late July, Ericsson placed a winning US$1.13 billion bid to buy some of Nortel's key assets, including its wireless division.
At the New York auction, Ericsson beat out rival bids from Nokia Siemens, which offered $1.032 billion for the same assets, and an informal $1.1 billion bid from the Waterloo, Ont.,-based Research in Motion.
The deal was later approved by both Canadian and U.S. bankruptcy courts, though RIM has alleged it was shut out of the auction after objecting to the way the sale was being handled. Nortel has said that RIM had many opportunities to make a winning bid.
In particular, RIM wanted the opportunity to bid on selected parts of Nortel's wireless division -- the patents to so-called long-term evolution (LTE) wireless technology -- that were not included in the auction.
Lazaridis said Nortel insisted on some "non-disclosure" conditions that RIM was wary of and thus, did not bid during the auction process.
He compared the situation to putting in an offer to buy a house and as the paperwork was being written up, finding out the owner had given a lifetime lease and sublet rights to a third-party.
"What benefit would there be to you to keep purchasing that house?" he said.
The LTE wireless technology promises to allow cellphone operators to provide much more advanced services to their devices.
Nortel has said it is not selling LTE patents to Ericsson, only the licenses, meaning they are not being sold at all -- a position echoed by Mark Henderson, the president and CEO of Ericsson Canada, when he appeared on CTV's Canada AM on Friday.
"These much-talked-about LTE patents that are being licensed to Ericsson, we're not purchasing them from Nortel," Henderson said. "That means that Nortel retains the ownership of the license, they stay in Canada and they are free to license those to any other company that they choose to do so."
Opposition politicians and others have said they are concerned that the Nortel sale could see top Canadian technology being acquired by a foreign company.
Nortel says it was spurned by Ottawa
At Friday's meeting in Ottawa, which began at 9 a.m. ET, members of the House of Commons industry committee will have the opportunity to quiz representatives from Nortel, Ericsson and RIM about the deal.
Early in the meeting, George Riedel, the head of Nortel's strategy division, said the full break-up and sale of the company could be completed by the start of 2010.
But he said Nortel has not decided on a process for how the sale of the company's valuable patents will be handled.
Riedel told MPs that Nortel has been unable to use federal tax credits for research and development for the last decade. He said the company has suffered tax losses since 2001 and has used the credits to lower its federal tax burden, so the technology being sold hasn't been funded by the government of Canada.
"This is a good deal for Canada," Riedel said.
He also said Nortel went to the Conservative government with two separate plans to keep it in business. The company sought $1 billion to continue running on its own, or $500 million to run with a partner.
The government didn't think Nortel's plan were viable and said the company was "tarnished", Riedel said.
"So as a result there was no support," he said.
BNN's Michael Kane said that it is possible for RIM to make a case that the government should not allow the sale to go forward -- which could potentially block the Nortel sale -- but it is unclear if Ottawa will agree.
"The dispute is over the sale of Canadian-developed technology to a foreign company, but Ericsson has had a presence in Canada for a long time and employs a lot of people in Montreal and works on this very technology," Kane told CTV News Channel, when explaining the hearings taking place in Ottawa. "Is that really a sell-out to a foreign company? This is what the big debate is going to be."
Henderson said it is surprising to see that RIM is pushing to block the Nortel sale when it did not participate in the formal auction process.
He also said Ericsson has done business in Canada for the past 60 years and has supplied service to both private industry and the federal government during that time.
