Ottawa backs Vodafone purchases of BlackBerry products, services

As BlackBerry Ltd. prepares to roll out its latest smartphone, the Classic, the Waterloo, Ont.-based company appears to be getting a huge helping hand from Ottawa.

Export Development Canada is lending $850 million U.S. to Vodafone Group Plc. to finance the procurement needs of the British telecommunications giant. As much as $750 million of the loan package will go to the purchase of equipment and services from BlackBerry (TSE: BB).

As a Crown corporation, EDC is  Canada’s export credit agency, and it provides financing and insurance solutions locally and around the world to help Canadian companies of any size respond to international business opportunities.

EDC said it targets foreign companies like Vodafone (NADAQ: VOD), whose procurement needs match up with existing Canadian expertise.

“Very simply, Vodafone’s global presence makes it a company that Canada’s telecom sector has to have a relationship with,” said Carl Burlock, senior vice-president of financial and investment with EDC, in a statement.  “One of the advantages in Canada’s trade toolkit is EDC’s financing, which provides us with direct access with senior decision makers within Vodafone.”

The five year financing deal extended to Vodafone is being made at commercial terms, but EDC did not release the rate of the loan.

Considered one of the world’s largest wireless carriers, Vodafone is also one of BlackBerry’s largest customers. The British company has been buying BlackBerry products and services since the early 2000s.

The upcoming purchase of BlackBerry products and services couldn’t have come at a more opportune time. John Chen, CEO of BlackBerry, has said his company’s restructuring phase has ended. However, the BlackBerry continues to trail rival phone manufacturers in a very crowded mobile market.

BlackBerry is poised to release its latest smartphone, the Classic, this week. It is one of the two new products – the other is the square-screened Passport handset – which the company hopes will be a hit with phone users.

The Passport has so far enjoyed positive reviews in the media, and pre-orders on the Classic in North America have sold out.

This is not the first time the EDC has been instrumental in bolstering BlackBerry’s sales.

In 2013, the Crown corporation loaned 200 million euros ($290 million) in working capital to Spanish telecom provider Telefonica S.A. (NYSE: TRF) to facilitate its procurement of BlackBerry smartphones, services and solutions.

In 2012, EDC released $750 million in loans to Vodafone to finance the company’s purchase of BlackBerry products and services.

Vodafone has recently repaid that loan.

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Jim Love, Chief Content Officer, IT World Canada

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