Telus Corp. offered to acquire all the shares of Clearnet Communications Inc. for $4.48 billion, creating a daunting competitor in Canada’s tight wireless market.
Under terms of the offer, Telus will acquire all of the outstanding shares of Clearnet for $47.48 per share. Clearnet shareholders can elect to receive $47.48 in cash or 1.636 Telus nonvoting shares for each Clearnet share tendered. Tendering shareholders will be prorated depending on the total number of shareholders electing to receive cash vs. Telus nonvoting shares, said the companies.
“We believe these two companies are a great fit. We share a common vision of our industry’s future, we have compatible wireless technology and together we are the leading national player-Telus is the wireless leader in western Canada, while Clearnet has a powerful presence in eastern Canada,” said Darren Entwistle, Telus’ president and chief executive officer.
Both Clearnet and Telus operate on a CDMA network. They also each possess partnership agreements with key U.S. wireless carriers-Clearnet has roaming agreements with Nextel Communications Inc. and Telus has similar agreements with Verizon Wireless.
The combined Telus/Clearnet entity will compete against Canada’s dominating carrier, BCE Bell Mobility, as well as with Rogers Wireless Communications Inc. and Microcell Telecommunications Inc.
The new entity’s wireless assets will include 1.8 million customers, annual revenues of $1.5 billion and “immediate national wireless coverage,” according to Entwistle.
“Wireless and IP applications are the two fastest-growing areas in telecommunications and their convergence will be the most significant event of the next decade for our industry. Our objective is to become the Canadian leader of the market,” Entwistle said.
The Yankee Group in Boston believes the merger will greatly benefit both companies. The acquisition turns Telus into a national carrier overnight, eliminating time-to-market issues that would have been prevalent had Telus opted to build its own network.
The Canadian government, however, stands to lose out because the combined company will be less aggressive when it comes time to bid for additional spectrum, The Yankee Group said. The company will have 80 megahertz of spectrum in British Columbia and Alberta and 45 megahertz of spectrum in the rest of the country.
“The end result is that there will be less competition during the upcoming spectrum auctions and John Manley’s (Minister of Industry Canada) dreams of U.K. or German-like spectrum dollars will not occur. Ironically, the benefactors of this will be the carriers, as they will pay less for spectrum than they originally anticipated,” said Yankee Group Analyst Mark Quigley.
George Cope, president and CEO of Clearnet, will assume the leadership of the new company. Approximately 2,600 employees from Clearnet will join Telus. The deal is expected to close at the end of October.