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THURSDAY MAY 21 1998ÿÿTelecomsÿ
MetroNet buys Rogers' subsidiary
By Edward Alden in Toronto
<Picture: Canadian flag>Canada's local tele-communications market is poised for a flurry of new competition after Calgary-based MetroNet Communications announced yesterday it was buying the telephone subsidiary of the cable group Rogers Communications.
The agreed C$1bn (US$690m) shares and cash purchase will make MetroNet, a start-up company that began offering local service this spring, the first serious competitor to the eight local telephone monopolies of the Stentor alliance.
The Canadian government removed the century-old regulated monopoly on local telephone service last January, opening the Canadian market to the kind of fierce local competition taking place in the US.
The purchase of Rogers Telecom will add 3,100 km of fibre optic cable, five cities and C$350m in plant and equipment to MetroNet's network.
MetroNet said the acquisition would allow it to double its revenue targets over the next decade. The combined company will have sales of just C$70m this year. But the aim is that after a decade sales will have risen to C$2bn and the company will command 16-18 per cent of the business and government market in its targeted areas.
Rogers' shares climbed C$1.55 to C$11.05 in midday trading yesterday, as investors were surprised by the size of the offer for its telecom assets. The cash-strapped company plans to use the cash proceeds to bring its outstanding debt below $C5bn.
Jeremy Burge, an analyst with TD Securities in Toronto, said the sale should help both companies despite the premium paid by MetroNet. Were MetroNet not to buy the assets, it would have to build them, and building them is expensive, he said.
MetroNet stock also shot up, rising C$4.90 to C$40.15 by midday. MetroNet will pay C$600m cash and 12.5m class B non-voting shares for the Rogers assets.
MetroNet hired Craig Young in February as its new president and chief executive officer. Mr Young was president and chief operating officer of Brooks Fiber, which developed a competitive fibre optic network in 44 US cities to compete with the Baby Bells before it was bought out for US$2.9bn by WorldCom last autumn.>>> |
