Canada’s telecom market saw major changes last week, as its four smallest telecom companies agreed
to merge into one company and Bell Canada formed a strategic partnership with U.S.-based Ameritech Corp.
The
merging of the four Atlantic region-based firms will create the country’s third-largest telecom company and second-
largest information technology provider. The new company, tentatively called AtlanticCo, is made up of Bruncor Inc.,
Island Telecom Inc., Maritime Telegraph and Telephone Co. Ltd. and NewTel Enterprises Ltd.
On a pro forma
basis, AtlanticCo will have a 1998 net income of $114.2 million, with some 230 million mobility subscribers and 78-
percent market share in the region.
“It has a solid financial foundation, and it has the size, scope and the
growth strategies to become a significant player in North America’s telecommunications and information technology
industries,” said Gerry Pond, president and chief executive officer of Bruncor. Pond is set to become executive
vice president of the new company and president of its Information Technology and Emerging Business group.
An
information packet detailing the merger plan and new company’s structure should be sent out in mid-April. All four
firms have scheduled a shareholders’ meeting to approve the measure for May 18 and 19. The merger is expected to
close May 31.
Meanwhile, BCE Inc. and Ameritech announced a strategic partnership, under which Ameritech
plans to invest about $3.4 billion for a 20-percent stake in BCE’s telecom subsidiary, Bell Canada.
Bell Canada is
being reorganized so it will hold several telecom assets previously held by BCE, which will keep 80-percent ownership
of the company. In particular, Bell Canada will acquire 65 percent of BCE Mobile Communications Inc.-a wireless
company with some 2 million subscribers-as well as 21.5 percent of Teleglobe Inc. and equity in six other regional
Canadian telecom companies, three of which are involved in the AtlanticCo merger.
Both companies’ boards of
directors have approved the measure and it also is expected to close by the end of May.
“This partnership
assures Bell Canada’s place at the forefront of the global communications industry, while keeping Bell Canada firmly
under Canadian control,” said Jean Monty, BCE president and chief executive officer.
Ameritech has several
international partnerships with European telecom operators, including a 41.6-percent stake in Denmark’s TeleDanmark,
a 17.5-percent stake in Belgium’s Belgacom, a 29.8-percent stake in Hungary’s Matav and a 19.7-percent stake in
Norway’s NetCom. Ameritech’s total international investments grew by 65 percent last year to more than $10 billion,
the company said.
Monty said BCE will consider a share repurchase to offset the dilution to BCE earnings caused
by the partnership. Proceeds will be spent on other BCE companies in sectors such as electronic commerce, satellite
services, systems integration and content services.
The partnership also will include several strategic cooperation
projects between Bell Canada and Ameritech, including sharing personnel, sales and marketing efforts and traffic
exchange on their respective networks.
