BCE Inc., Canada’s largest telecommunications company, finished the spinoff of its stake in telecommunications equipment supplier Nortel Networks Corp., closing a transaction valued at approximately $59 billion.
BCE distributed its 35-percent ownership interest stake of 504.9 million shares in Nortel Networks to its common shareholders while retaining a 2-percent interest in the company, Nortel said.
BCE’s approximate 500,000 shareholders will receive .78 of a Nortel common share for each BCE share they hold, and Nortel shareholders will receive one common share in a new public company, named Nortel Networks Corp., in exchange for each of their Nortel common shares. The former Nortel Networks Corp. has been renamed Nortel Networks Ltd., the company said.
“Nortel Networks and BCE have grown together for more than a century, but the Internet has redefined the communications industry, and it is time to go our separate ways,” said John Roth, president and chief executive officer of Nortel Networks Corp., in a statement from the company.
BCE at one point owned more than 50 percent of Nortel, but has gradually decreased its stake. Nortel’s steady growth in the optical and wireless communications equipment market was a major factor in advancing the company toward independence.
“It got to the point where they (BCE) couldn’t afford to pay the taxes on the amount of value we were adding to their market cap,” said David Chamberlin, spokesman for Nortel.
Chamberlin also said potential and established customers were misperceiving the relationship between the two companies, and sometimes hesitated in entering agreements with Nortel because of a possible conflict of interest.
“BCE was a customer of ours so there were a lot of customers that said, `We compete with BCE. What kind of upper hand do they have?’ ” Chamberlin said.
In fact, Chamberlin said it has been the perception that BCE held a lot of sway with Nortel, which he said was not true. BCE’s relinquishing most its stake in the company will enable Nortel’s shareholders to participate more directly with Nortel and hopefully attract more investors and customers, the company said.
The final step of the plan was completed last Friday, when Nortel split its shares two-for-one at the close of market, adjusting the BCE conversion to 1.57 shares. At RCR press time last Thursday, Nortel shares were trading on a “when issued” basis at $108.62, up 62 cents from the previous day’s close.
Regular trading of the stocks begins on the New York Stock Exchange on Tuesday.
In other Nortel news, the company said Telstra in Australia awarded Nortel a contract for a General Packet Radio Service solution to enable high-speed wireless Internet service for its Global System for Mobile communications customers in Melbourne, Australia.
Telus Mobility in Calgary, Alberta, also extended its supply agreement with Nortel for three more years to provide wireless network infrastructure and services.
