A U.S. bankruptcy judge rejected on Wednesday Verizon Communications Inc's objections to a plan by Nortel Networks Corp to sell its enterprise business to Avaya Inc for $900 million.
Verizon argued that the sale put public health and national security at risk because Avaya would not commit to taking up the enterprise business's contracts to support Verizon systems, including those at hospitals and military facilities.
Nortel argued that the objection was largely an attempt to prevent Avaya from renegotiating supply contracts on terms less favorable to Verizon.
I'm confident that to a large extent it's an economic issue, Judge Kevin Gross said in explaining his decision.
Nortel held an auction over the weekend for its enterprise business. Avaya outbid a joint venture that included Siemens AG of Germany.
Nortel's enterprise business supplies equipment such as switches to thousands of businesses and government agencies to support phone systems, voicemail and video conferencing. It also sells the equipment to Verizon, which resells it as part of its own phone systems offerings. Verizon depends on the enterprise business for maintenance and spare parts.
Toronto-based Nortel was once the largest telecommunications equipment company in North America, but declared bankruptcy earlier this year and has been auctioning off its businesses to repay creditors.
The case is In re: Nortel Networks Inc, U.S. Bankruptcy Court for the District of Delaware, No. 09-10138.
(Reporting by Tom Hals: Editing by Tim Dobbyn)