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Technology Stocks : Clearnet, the Canadian wireless play (CLNTF) -- Ignore unavailable to you. Want to Upgrade?

To: brokker who wrote (112)	1/29/1999 8:26:00 AM
From: Technopeasant	Read Replies (1) \| Respond to of 214

Ottawa to ignite takeover frenzy in cellphone sector Friday, January 29, 1999 ANDREW WILLIS and SHAWN McCARTHY With files from reporter Tyler Hamilton. Toronto and Ottawa -- ANDREW WILLIS in Toronto SHAWN McCARTHY in Ottawa Industry Canada is going to liberalize rules governing cellular phone companies, sources say, a move analysts expect will generate takeover battles. Ottawa is reviewing a four-year-old cap on the amount of the broadcast spectrum that each phone company is assigned for its personal communications services, or PCS. The so-called "spectrum cap" blocks takeovers because the acquiring company would breach its assigned limits. Sources in the investment community say the spectrum cap on PCS will be lifted in the next three months. If that happens, telecommunications analysts and bankers predict rivals BCE Inc. and BCT.Telus Communications Inc. will attempt to broaden their PCS units by bidding for Clearnet Communications Inc. Such a deal would likely be worth more than $700-million, based on Clearnet's current market price. An official at Industry Canada said that last Friday was the deadline for industry submissions on the issue of lifting the spectrum cap, adding that no decision has been made on the policy. The spectrum cap was put in place in 1995, when PCS licences were handed out, to foster competition in the sector. The U.S. cellphone industry employed much the same system. Domestic heavyweights Bell Mobility Communications Inc. (a subsidiary of Montreal-based BCE) and Rogers Cantel Mobile Communications Inc. of Toronto got slots, as did startups Clearnet and Montreal's Microcell Telecommunications Inc. "Four years ago, the incumbent cellphone companies would have dominated PCS if it weren't for the cap," said a Bay Street telecommunications analyst, who asked not to be identified. "Now, Industry Canada is asking, 'Do we still need the cap to foster competition?,' and I think the answer they're going to come up with is 'No.' " Clearnet is one of the companies pushing for an end to the PCS spectrum cap. In the Toronto-based company's submission to Industry Canada, director for regulatory and government affairs Serge Bertuzzo wrote: "Clearnet is convinced that the spectrum cap is no longer required and should be removed entirely." Mr. Bertuzzo added: "Removal of the spectrum cap in and of itself at this time is not sufficient to have any negative impact on competition and choice. We also note that after three years, the spectrum cap is beginning to have unintentional and undesirable side effects." The Clearnet executive said cellphone companies have run out of space to operate under the existing cap and will have difficulty adding a new generation of PCS services. Analysts and investment bankers view Clearnet's national PCS network, which holds a 6-per-cent share of the market and is adding subscribers each quarter at a 20-per-cent clip, as a tasty target for both BCE Mobile and BCT.Telus (the pending name for the Telus Corp.-BC Telecom Inc. merger), as the two companies strive to build phone systems that span the country. Unlike Microcell, Clearnet's technology matches that of the two giant phone companies, making integration much easier. "Clearnet has the strongest strategic position and is the most attractive takeover candidate in the Canadian wireless sector," said a report two weeks ago from Dvai Ghose, an analyst with HSBC Securities Inc. in Toronto. "We could envisage a scenario under which BCT.Telus would purchase Clearnet's eastern [Canadian] PCS spectrum while Bell Mobility could purchase Clearnet's western PCS spectrum." Other analysts said for competitive reasons, both BCT.Telus and Bell Mobility would likely want sole ownership of Clearnet. Clearnet has a market capitalization of $623-million and $1.1-billion of debt. A voting and non-voting share structure gives 63-per-cent control of the company to the Simmonds family of Port Perry, Ont. A recent flurry of cellphone acquisition activity in the U.S. market has helped boost Clearnet's stock price -- the stock closed at $17.50 yesterday on the Toronto Stock Exchange, unchanged on the day but up from the $12 level at the beginning of the year. In a blockbuster deal last month, Vodafone PLC, the largest cellular phone operator in Britain, offered $55-billion (U.S.) for cellphone concern AirTouch Communications Inc. of San Francisco, trumping a $45-billion bid by Bell Atlantic Corp., the largest U.S. local phone company.