Call-Net shares soar on talk of sale to 360networks
by Tyler Hamilton - Friday, June 16, 2000
Call-Net Enterprises Inc. is in talks to sell various fibre-optics assets in Canada and the United States to 360networks Inc., the two telecommunications firms said yesterday.
Investors boosted Call-Net's class B shares nearly 35 per cent or $1.27 to $4.95 on the Toronto Stock Exchange.
Analysts said the non-strategic assets -- including a U.S. network and 16 lines of "dark" or unused fibre in Canada -- could fetch as much as $525-million for Toronto-based Call-Net, which requires the money to breathe life into a new business plan focused on serving small and medium-sized businesses.
Vancouver-based 360 would likely use the assets to fill gaps in its own North American telecommunications network and then wholesale the rest, analysts said.
Over the past few months, 360 has been actively buying and swapping fibre lines with various telecommunications firms throughout the United States to expand its network.
Both companies confirmed yesterday they were in negotiations, but neither would say which assets were under discussion. "It's obviously part of the discussions and we can't define them right now," said Call-Net spokeswoman Susan Fraser.
Call-Net had previously been up for sale, a situation sparked by dissident shareholders who were displeased with the company's financial performance. But the company took itself off the auction block in April after six months of shopping itself around, vowing instead to sell various non-strategic parts.
On Tuesday, the company said it had sold a 41-acre office park in Toronto for $85.4-million to Bentall Corp. and Deutsche Bank Canada.
Dvai Ghose, an analyst with CIBC World Markets in Toronto, said Call-Net got a good price on the deal. He added that the company must now act fast to sell its surplus fibre assets because the price of dark fibre continues to drop as new technologies improve capacity and supply.
"Holding on to dark fibre doesn't make sense," he said. "They have to sell if they want to restructure their business."
Mr. Ghose estimates that Call-Net could sell its U.S. network for up to $275-million and its unused fibre in Canada for between $200-million and $250-million in today's market.
Call-Net, parent of Sprint Canada Inc., announced earlier this year that it would begin focusing on the small and medium-sized business market, by offering a full package of voice and higher-margin data services, including high-speed Internet access.
Eamon Hoey, president of Hoey Associates Telecommunications Consulting Service Ltd. in Toronto, said 360 -- if it did a deal -- would likely buy Call-Net's dark fibre, use what it needs for itself, then wholesale the excess capacity when demand rises.
"If you can buy fibre from somebody else at a reasonable price and turn it around [and resell it], there's a real financial opportunity," Mr. Hoey said.
Brahm Eiley, president of Convergence Consulting Group Ltd. in Toronto, said 360 is likely to do a deal only if it can get the assets at a good price; otherwise it would simply lay the dark fibre itself.
He added that if an agreement is reached, Call-Net wouldn't be getting top dollar. "This is probably a bit of a fire sale." |
