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TELECOMS: Carriers confirm merger plan
By Scott Morrison in Toronto
Canada's four Atlantic telephone companies are to merge, forming the country's third largest carrier with a market capitalisation of C$2.8bn (US$1.84bn).
The widely anticipated merger, announced yesterday, was seen as a response to the increasing pace of consolidation in the Canadian telecommunications industry.
Bruncor, Island Telecom, Maritime Telegraph & Telephone and NewTel Enterprises said they could strengthen revenue growth, cut costs and increase their competitiveness by combining resources.
The new company, AtlanticCo, would serve the provinces of New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland, with combined annual revenues of C$1.7bn and earnings of C$172m. The companies, which recently developed and installed joint billing and administrative systems, estimated they would save C$130m annually by the end of the second year.
Analysts said that, in addition to improving operational efficiencies, combining the companies would increase the liquidity of the group's shares and attract institutional investors, which have largely avoided shares of the small carriers.
"AtlanticCo will be greater than the sum of its parts. This merger builds upon our long history of co-operation and represents a natural evolution," said Stephen Wetmore, president and chief executive of NewTel, who was to assume the same responsibilities at the new company.
BCE, Canada's largest telecommunications company and a shareholder in each of the four companies, had already said it would support the merger, which is expected to close at the end of May. BCE would hold almost 42 per cent of the combined company and be a strategic partner through its Bell Canada subsidiary.
Under terms of the transaction, each common share of MT&T would be exchanged for 1.667 AtlanticCo common shares. Each Bruncor common share would be worth 1.011 shares in the new company. NewTel common shares would be swapped for 1.567 AtlanticCo common shares, while Island Telecom shares would be exchanged on a 1-for-1 basis.
Lino Celeste, Bruncor chairman, would be chairman of AtlanticCo. AtlanticCo's main rivals would be carriers such as AT&T Canada and Sprint Canada, which have been competing in the long-distance market and are now moving to enter local markets.
The new group said it would co-operate with Bell Nexxia, the BCE-held broadband network, to provide internet protocol services in the region. It would also expand its information technologies business with the telecoms, oil and gas sectors worldwide.
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