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Jim Balsillie, seen speaking in Detroit on Wednesday, is staging a pep rally Friday in Hamilton to support his bid to bring an NHL team to southern Ontario.

Rebecca Cook/Rebecca Cook/Reuters

In a stunning display of industrial brinkmanship, Research In Motion Ltd. is alleging that Nortel Networks Corp. shut it out of the bidding for the distressed telecom giant's nationally sensitive wireless assets.

It has thrown down a gauntlet to the federal government to review the auction for Nortel's assets - or lose technology considered vital for Canada's national security and industrial competitiveness.

In a combative statement issued Monday evening, Jim Balsillie, RIM's co-CEO, said restrictive conditions imposed on a potential bid by RIM are preventing his company from grabbing the torch dropped by Nortel as national champion in wireless technology.

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"RIM remains extremely interested in acquiring Nortel assets through a Canadian ownership solution that would serve the dual purpose of keeping key wireless technologies in Canada and extending RIM's leadership in the research, development and distribution of leading-edge wireless solutions," Mr. Balsillie said in the statement.

"But RIM has found itself blocked at every turn," he said.

He said that based on a preliminary review, RIM is prepared to bid in the area of $1.1-billion (U.S.) for the wireless and other assets. Nokia Siemens Networks, a Finnish-German consortium, has submitted a market-test bid of $650-million for the wireless assets.

With this statement - unusual in the quiet corridors of industrial diplomacy - the Nortel debacle, which has seen the once venerable company file for bankruptcy protection and put itself up for sale, has become a major test of Ottawa's resolve on national industrial strategy.

Ottawa has maintained its distance from the Nortel crisis. Despite some calls for intervention, Industry Minister Tony Clement has said the government wants a private-sector solution.

Mr. Clement said in a statement Monday night that he was aware of discussions between Nortel and RIM, and he and his officials were following the situation closely. "As Nortel is in bankruptcy protection, the Government of Canada does not have a say how the judge rules on any proposed sale of Nortel assets."

Nortel issued a statement late Monday night saying it is disappointed that RIM decided to issue a press release regarding the auction. It pointed out that on June 30, the courts established bidding procedures, and "RIM did not object to the approval of these procedures."

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Nortel added it was not until July 15 that RIM submitted a letter asking to be a qualified bidder. "Since that time, Nortel has diligently attempted to work with RIM on acceptable confidentiality terms relating to Nortel's valuable intellectual property assets, but RIM refused to comply with the court-approved procedures."

Even after RIM's statement Monday, Nortel said it continues to be willing to provide RIM with the opportunity to participate in the auction.

RIM's challenge came on the same day that Nortel, once one of the world's biggest technology firms, said it has agreed to sell its enterprise unit, which builds networks for companies, to U.S. rival Avaya Inc. for $475-million but added that higher bids may emerge.

Later in the day, RIM said it believes that the loss of Canadian ownership of Nortel's wireless businesses "may significantly, adversely affect national interests, with potential national security implications, and that the Government of Canada should review the situation closely."

The words carry echoes of the debate over the potential sale of the space business of Macdonald Dettwiler & Associates to a U.S. company.

The Conservative government blocked that deal in April, 2008, because it would have meant a transfer of strategic satellite technology outside Canada. The deal was not in the best interests of Canada, the government said.

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Nortel's fate could be construed as equally sensitive for industrial security because it is by far the largest corporate research and development spender in the country.

As a wireless technology champion, the only company that, in the view of many observers, could bid to replace a fallen Nortel would be Waterloo, Ont.,-based RIM, maker of the highly popular BlackBerry. But now RIM is saying that it is being prevented from taking on that mantle by the conditions of Nortel's break up auction, which involves stalking-horse bids from other companies.

RIM said in its statement it sought to be qualified as a qualified bidder in Nortel's auction for the wireless business, but was told it could be qualified only if it pledged not to submit offers for other Nortel assets for a year.

"In seeking to impose this condition, Nortel and its advisers were fully aware of RIM's desire to purchase other Nortel assets as part of a solution to retain key portions of Nortel's business under Canadian ownership," RIM said.

"Despite repeated efforts, Nortel, its advisers and its court-appointed monitor have rejected RIM's repeated attempts to engage in meaningful discussions."

RIM said it believes its offer would result in an extremely attractive price for Nortel creditors and value substantially in excess of the so-called stalking horse bid by Nokia Siemens.

It also pointed out that the Nokia Siemens bid was being supported by a $300-million loan from Canada's own Export Development Corp.

RIM officials were unavailable for comment.

But Nortel CEO Mike Zafirovski said earlier in regard to the sale to Avaya that "we have stalking horse agreements for the two largest businesses within Nortel and we are acting with a great level of speed and resolve to be able to conclude all of the other stalking horse agreements. I believe that many of those will be completed and announced before this quarter is over."

According to the bankruptcy process in Ontario Superior Court, all bids for the company's wireless assets must be received by 4 p.m. ET on Tuesday. The auction will take place on Friday at 9:30 a.m. in New York. The process also requires potential bidders to enter into a confidentiality agreement.

Stalking-horse deals are designed to test the market, typically setting the floor for bidding, and make up the lead bid at a bankruptcy auction.

"We certainly believe there are a number of other interested parties that will take advantage of the stalking horse process to come in and bid for these assets," Mr. Zafirovski said.

With reports from Karim Bardeesy, Shawn McCarthy and Reuters

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