TORONTO - The U.S. Justice Department is being urged by the head of a Canadian communications company not to interfere in proposed takeover of Notel’s enterprise division by American communications giant Avaya.
In a letter to the Justice Department responding to reports of complaints about the deal to U.S. anti-trust investigators, Jeff Wiener, president of Toronto-based Digitcom Canada Inc. says the objections are "without merit."
Wiener, whose company is a dealer for Avaya products in Canada, says in the letter that the concentration the acquisition would produce doesn’t rise to the department’s anti-trust threshold.
Avaya agreed to buy insolvent Nortel’s enterprise division last month for US$475 million in a stalking horse bid.
The deadline for competing offers closes Sept. 4. After a winning bidder is chosen, the deal still must be approved by bankruptcy courts in Toronto and Delaware.
Reports say anti-trust investigators have received complaints from some U.S. companies who fear the deal risks creating a duopoly with Avaya and Cisco Systems controlling 75 per cent of the enterprise market.
Wiener says the "customer premise equipment" business market - telephones, switches and other such equipment -consists of five major players, with Cisco holding the biggest piece at almost 21 per cent.
It is followed by Avaya at 15.4 per cent, Nortel at 11.5 and NEC 8.3 and Mitel at 8.2 for a total of 65 per cent of the world market.
Wiener said that any of the remaining top four vendors would be catapulted to near the top if they acquired Nortel’s assets.
"The bottom line is the market would be entering the realm of moderate concentration," but would be safely below the anti-trust threshold.
He suggests that the Herfindahl index used by the U.S. Justice Department to measure corporate concentration would be 1,376 under the deal. Indices between 1,000 and 1,800 are considered to be moderately concentrated and those above 1,800 concentrated, he added.
Digitcom represents both the Avaya and Cisco product lines, but Wiener said the technologies and companies representing "the biggest competitive threats moving forward" are Microsoft, Skype, Google and Hosted VoIP
"The CPE industry is going through a paradigm shift . . .(and) these are the technologies that are changing our industry," he wrote.
"The fact that Avaya is acquiring assets as part of Nortel’s bankruptcy protection process is proof the CPE industry needs some consolidation to better prepare for the future," he wrote.
As an Avaya dealer Wiener concedes he has an interest in the deal going through, but he told The Canadian Press in an interview Friday that in this case he was "speaking more specifically as a guy in the telecom industry who is wanting to make sure that the government doesn’t intervene in private affairs like this where there is no validation for it."
