Verizon protests Avaya's potential Nortel enterprise business buy

Verizon is opposed to the sale of Nortel’s enterprise business to Avaya because the carrier fears its support contracts will end and cut off key customers.

According to court documents filed in Delaware, Verizon claims a sale of the Nortel business to one of two bidders – Avaya and Siemens Enterprise Networks, according to published reports -- will jeopardize U.S. law enforcement, anti-terrorism and national defense interests because the successful bidder would not take on Verizon support contracts. In its court filing, Verizon singles out Avaya as a potential acquirer that may not assume those contracts.

The rise and fall of Nortel

"Communications networks critical to the operation of the federal government, and the defense, safety, health and security of the American public are at risk," Verizon said in the filing.

"So integral are (Nortel's) CPE products and services to these critical communications systems, in fact, that if they fail to operate - due to a lack of maintenance or repair, the inability to obtain spare parts or software fixes, or for some similar reason - entire systems will immediately be disrupted or otherwise compromised, and in due time may cease to function entirely," Verizon stated.

A Delaware judge has scheduled an emergency session today to hear Verizon's concerns, according to a report in the Wall Street Journal. Avaya is bidding $475 million for Nortel’s enterprise business, which includes the company’s routers, switches and unified communications/IP telephony assets.  The auction is Friday Sept. 11.

Apparently, only Avaya and Siemens Enterprise Networks, majority owned by private equity firm Gores Group, are bidding for the unit. Bids were due Sept. 4.

Avaya is already under scrutiny from the U.S. Department of Justice about possible anti-competitive effects of its purchase of the Nortel unit, the WSJ reports.

The buyer gets to determine which exisitng Nortel contracts to retain or terminate. Verizon and Avaya both say they are negotiating an arrangement to keep the contracts active.

“Avaya is committed to providing current and future customers of Avaya with the highest levels of service and support as we pursue the acquisition of Nortel Enterprise Solutions," Avaya said in a prepared statment. "Avaya is engaged in discussions with Verizon to attempt to negotiate suitable arrangements for the assumption of the contracts referenced in Verizon’s motion filed September 9, 2009. Avaya continues to believe that the acquisition of Nortel’s Enterprise Solutions unit by Avaya will deliver significant value for customers and other stakeholders of both companies.”

If the parties can’t come to an agreement and Avaya wins the bid, Verizon said it plans to file an objection to the sale by Sept. 14, according to the motion.

Nortel is liquidating assets and operations after failing to restucture the company as a viable entity under Chapter 11 bankruptcy.