Will Bell Rescue Nortell?

At this moment Nortel is trading at an abysmal $0.54 a share. This is a company that, in the 90s, used to be the darling of the Canadian “tech” industry. Never mind that in this case “tech” meant rusty old coper wires attached to “bell-head” technology; investors loved the fact that telecoms were going through a major upgrade (analog to digital) and Nortel was the (nearly) monopoly supplier. What they failed to appreciate was the impending impact that the “network of networks” (the internet) would have.

Nortel stock soared so high that it dwarfed it’s parent (BCE). It got so embarrassing that BCE decided to divest itself of its star asset and ended up paying out a huge dividend to stock holders on the sale of Nortel. I don’t know who it was at BCE who made that decision but a whole lot of BCE share holders owe them a beer.

Fast forward… Nortel stock is so low that I’m thinking about smashing my piggy bank and getting a cash advance from my ATM to purchase the company outright.

But the fact is, Bell (and every other Canadian Telco) absolutely needs Nortel. They can not operate without Nortel equipment. Canada is Nortel top-to-bottom and if they can’t buy replacement Nortel equipment they are in serious trouble. Canada’s telcos simply can not afford to loose their only supplier.

Swirling in the background is the Ontario Teachers takeover of Bell. Since that deal was announced, Bell has been handcuffed. It can not spend any money. So, once the deal ends (either in success or failure), Bell should be free to make some deals and I’m thinking Nortel would be a target.

Lets look at it another way; lets say Bell passes on Nortel. If I was a Nortel competitor, I’d snap them up and discontinue their entire product line. That means every Nortel customer would be in a “forced upgrade” scenario and … well, you do the math….

Bell and the rest of the telecoms can’t afford to let that happen. Nortel seems like a bargan.