Telefon AB LM Ericsson scored an eleventh-hour victory in winning the prized wireless division of Nortel Networks Corp. this summer. But it wasn't easy: First, Ericsson had to trump a leading bid from rival Nokia Siemens Networks; then it encountered a nationalist backlash that reverberated all the way to the Prime Minister's Office. Simon Avery asked Mark Henderson, president and CEO of Ericsson Canada, for his take on the acquisition that turned into a trial by fire.
Opponents of the deal included Research In Motion boss Mike Lazaridis and Liberal Industry critic Marc Garneau . Were you surprised at the controversy? We weren't surprised at the emotion, because everyone can understand that what's happened to Nortel over the last several years has been very emotional for a lot of Canadians. What did surprise us was the fact that a lot of the messages around Ericsson had been lost in the mix: The fact that we had been in the country longer than Tim Hortons, that we employ thousands of people, have invested billions in R&D, and have affiliations with universities. We had to try very hard to remind everyone, both the media and the government, just what Ericsson represents in Canada.
How did you prevent the attacks on the acquisition from derailing Ericsson's plans? It was sticking to the messages of what Ericsson has done in Canada, and how that bodes well for the future. We made sure that when it came to the technology, everyone was aware that Nortel's [next-generation wireless]LTE patents were being licensed on a non-exclusive basis, which means they are retained by Nortel and can be licensed and sold again. As for national security, we emphasized that Ericsson has been behind some of the largest telecom deployments in the country and that we have been an accredited vendor to the Canadian government, including the Canadian navy.
Lazaridis told a parliamentary committee that RIM had handshake deals with Nortel for some of the wireless assets and that the company was "snookered" by the deal. Was RIM snookered? I can't really comment on that. The process was very well monitored. There were certainly vehicles to comment on the process and engage in how it was conducted. There were obviously several companies that did engage in the process and were involved in the auction. So as to what specifically happened to RIM, I think they have to answer that.
How do you ensure the technology still benefits Canadians? It's well known that some of the R&D Nortel was doing in LTE and smart antenna technology was very much envied in the industry. I think it really complements the work Ericsson is conducting globally. When it comes to LTE and [next-generation wireless]technology, it is going to be North America that is driving a lot of this new standard. So it is really important to enhance the large research pool in LTE in North America and make sure that customers understand that we are investing in the market and building expertise right here.
What was Ericsson's R&D investment in Canada before the deal, and what will it be after? In Montreal, we employ about 1,500 people. Approximately half of those are tied up in R&D. The acquisition adds another 800-plus, and about 650 of those are research and development. Basically the amount of R&D conducted by Ericsson in Canada is going to double. The amount Ericsson invested in 2008 was about $126 million.
Is there a place for nationalism in the business of technology? That's a tough question. Telecom is such a global industry. Patents are openly licensed and cross-licensed. The entire industry is based on standards developed on a global basis. So it's very difficult to say that taking that tack would be beneficial. Of course, there's a lot of R&D activity in Canada and we've made great strides in producing hundreds of patents based on Canadian expertise. Those innovations are being integrated into products and exported worldwide. It's certainly a global industry, and standards and developments have to be taken on that basis.