Saturday, April 18, 1998 ( FP Article)
Telus' move on AT&T Long Distance collapses
By PHILIP DEMONT
Telecom Reporter The Financial Post
ÿTalks between Telus Corp. and AT&T Canada Enterprises Inc. concerning the purchase of AT&T Canada Long Distance Inc. collapsed Friday after the two sides couldn't agree on how the new company would operate.
ÿTelus and AT&T Canada failed to resolve "certain key issues," according to the Alberta phone carrier.
ÿA myriad of difficult questions, such as whether Telus could influence the product line of the new company and how much say AT&T would have over the marketing of the brand name, became deal breakers, said sources close to the talks.
ÿ"The intention was that the AT&T brand would be used nationally," said one insider. "And AT&T wanted some say in how the brand was represented."
ÿDespite the collapse of the talks, George Petty, president and chief executive of Telus, said the company "remains committed to its growth strategy."
ÿThe failure of the discussions ends a possible merger that would have produced a cross-country telecommunications powerhouse to compete with Call-Net Enterprises Inc. and the Stentor alliance of provincial phone carriers.
ÿOn Wednesday, Call-Net made a surprise $1.6-billion takeover offer for long-distance carrier Fonorola Inc., increasing speculation that Telus and AT&T had to reach a deal soon.
ÿJeff Welke, a spokesman for Telus, denied that Call-Net's move on Fonorola had an impact on the Telus-AT&T discussions. He said the company still plans on expanding beyond Alberta and has $264 million in cash for acquisitions.
ÿEven with the deal's failure, however, industry observers are mixed about whether Telus still needs an alliance to compete.
ÿ"Telus will need something else. And that something else is BCE," said Iain Grant, managing director of Yankee Group in Canada, a Brockville, Ont.-based consultancy.
ÿTelus now needs to get Montreal-based BCE Inc., which owns Bell Canada, to buy a piece of the Alberta company, Grant suggested.
ÿBut others disagreed.
ÿ"There are other potential ways for Telus to expand outside of Alberta," said one source at the company.
ÿFor example, Telus could reach an arrangement with BC Telecom Inc. to create a larger company in Canada's two westernmost provinces.
ÿShares in Telus (T/TSE) closed down $2.05 Friday at $40.75.
ÿAccording to Bay Street sources, Telus was to purchase the majority stake in AT&T Canada Long Distance for between $1 billion and $1.2 billion.
ÿThen AT&T Corp., AT&T Canada's U.S. parent, would buy 33% of Telus, the maximum allowed under Canadian law, using its holdings in AT&T Canada Long Distance to cover part of the cost.
ÿThe Alberta company also would look at a strategic alliance with Montreal cable operator Groupe Vid‚otron lt‚e.
ÿObservers suggested Call-Net's high bid for Fonorola boosted AT&T's asking price.
ÿEarlier in the week, William Catucci, AT&T Canada Long Distance's chief executive, said his company had increased in value to $1.5 billion because of the Call-Net bid, up from $1.2 billion before the takeover offer.
ÿTelus faced unspecified, but substantial, penalties for breaking its existing agreement with the Stentor phone alliance and linking up with AT&T Canada, sources said.
ÿStentor has never released the details of the agreement between the carriers.
ÿBell Canada might in fact have been pleased if Telus had broken up Stentor. The existing arrangement prevents participating carriers from pursuing different business strategies in other provinces.
ÿ"Stentor is dead," said one executive with a firm outside Stentor.
ÿBut if Bell Canada causes its demise, Stentor must be wound up over a three-year period. If Telus or BC Tel, Stentor's two other crucial members, kill the organization, the waiting period shrinks to one year, according to the alliance's rules.
ÿ-with files from Carol Howes/FP |
