VoiceStream Wireless Corp. announced plans to invest in Canadian Global System for Mobile communications operator Microcell Telecommunications Inc., a move that sets the stage for a seamless North American footprint.
VoiceStream will invest $275 million to purchase 9.59 million newly issued Class A shares of Microcell, paying about $30 per share, the companies announced last week.
The class A shares account for about 15 percent of the issued and outstanding equity securities of Microcell. These are nonvoting shares and are convertible at any time into common shares, which are voting and subject to Canadian foreign-ownership restrictions. If converted, the shares would represent a 22.6-percent voting interest in Microcell. At the closing of the transaction, VoiceStream will be entitled to designate two members to Microcell’s board of directors.
The companies’ announcement came the same week the Federal Communications Commission approved the merger of VoiceStream and Omnipoint Corp. The only hurdle left for the merger is shareholder approval, set for Feb. 24. VoiceStream also is awaiting approval to merge with Aerial Communications Inc.
VoiceStream has raised a significant amount of money in recent months to help it fund more acquisitions and investments. It also has strong outside investors like Hutchison Whampoa Ltd., Sonera Group plc and Telephone & Data Systems.
Foreign ownership in Canadian companies is capped at 33.33 percent, though analysts are confident the country will lift this rule soon. U.S. carriers have taken an increased interest in Canada, realizing the value of incorporating the country into their North American strategies.
AT&T Corp. and British Telecommunications plc own a combined 33-percent stake in Rogers Cantel. Nextel Communications Inc. holds a 10-percent stake in Clearnet Communications Inc., which operates both a Code Division Multiple Access network and an integrated Digital Enhanced Network system.
David Freedman, telecom analyst with Bear, Stearns & Co. in New York said VoiceStream’s investment in Microcell will allow the two companies to make joint capital-expenditure decisions, giving Microcell more leverage over its equipment suppliers. New international roaming deals could also match flat-rate roaming deals Rogers offers with AT&T.
Microcell said it plans to use the new funds to help finance subscriber acquisitions, digital-network expansion and a transition to high-speed data transmission technologies such as General Packet Radio Services technology.
“We intend to fully leverage the power of GSM and our strategic partnership with VoiceStream to position Microcell as the leader in the data world,” said Andre Tremblay, chairman, president and chief executive officer of Microcell.
