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Some small telecom companies are testing the waters for potential buyers in the wake of changes to foreign investment rules.
After years of prodding by the industry, the federal government made legislative changes last summer to allow some telecoms to become 100-per-cent foreign owned.
Those measures, which apply to companies with a market share of 10 per cent or less, were intended to bolster competition by enabling smaller players to tap new sources of capital.
U.S.-based Primus Telecommunications Group Inc. has already announced a deal to take full control of Canadian-based Globility Communications Corp.
Although more merger-and- acquisition activity is anticipated in the sector this year, analysts are now questioning whether it is taking too long for some of those deals to materialize.
Here are three telecoms to watch:
Manitoba Telecom Services Inc.
Winnipeg-based MTS said in September that it was launching a strategic review of its Allstream division, which sells telecom services to medium-sized and large Canadian businesses. Chief executive officer Pierre Blouin this month dismissed suggestions that the process was becoming protracted, stressing “multiple options” were being assessed.
Although MTS has said the review could take up to a year, some analysts now believe the probability of a sale to a foreign buyer is diminishing. Some had previously said that Allstream could fetch up to $900-million.
Sources have also said that domestic carriers including BCE Inc., Telus Corp., Rogers Communications Inc. and Shaw Communications Inc. have previously taken a pass on buying the division. MTS acquired Allstream, formerly known as AT&T Canada, in a $1.7-billion deal in 2004.
This Thornhill, Ont.-based telecom also embarked on a strategic review in September to examine a range of options, including a possible sale.
Although it has previously said that foreign investment changes were the catalyst for its review, it has not set a definitive deadline to complete the process.
Such U.S. companies as Towerstream Corp. and Airband Communications Inc. are touted as potential buyers, but TeraGo could also snag a Canadian suitor.
Greg MacDonald, an analyst with Macquarie Capital Markets Canada Ltd., has said Rogers and Cogeco Cable Inc. could be interested in “owning or partnering” with TeraGo, which provides wireless broadband, data and voice services to small and medium-sized businesses in numerous Canadian markets.
Globalive Wireless Management Corp.
When Ottawa changed the foreign investment rules, most observers suggested that Globalive would be the primary beneficiary. Toronto-based Globalive, which operates as Wind Mobile, had already overcome a torrent of regulatory and legal challenges related to its ownership structure. Even so, it was thought that revamped rules would dispel lingering concerns about the financial backing it receives from Egypt’s Orascom Telecom Holding SAE. (Orascom is, in turn, majority-owned by Amsterdam-based VimpelCom Ltd.)
Wind could eventually strike a merger deal with rival Mobilicity, but sources have also said that VimpelCom could also pursue a possible sale of Wind to an incumbent like Rogers. A standstill agreement that prohibits incumbents from buying new entrant’s wireless licences expires in 2014.