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TORONTO, VANCOUVER -- Bell Canada is expanding its Western Canadian business, striking a deal to buy the domestic assets of 360networks Corp. for $275-million, as the telephone company staged its annual meeting in Vancouver to highlight its growing national presence.

"Next year, Bell will celebrate our 125th anniversary, and we will do it from coast to coast," Michael Sabia, president and chief executive officer of BCE Inc., Bell's owner, told shareholders at the meeting. "It is a remarkable milestone."

Mr. Sabia spoke of British Columbia's economic recovery and a "new spirit" in the province, of which Bell wants to be a part. He outlined various investments in the region, including a plan to stage the Bell Canadian Open in Vancouver, a golf tournament usually held in Ontario or Quebec, next year.

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While BCE is acquiring all of 360networks' Canadian operations, it plans to sell part of the Eastern Canadian business to Call-Net Enterprises Inc. Bell's focus on the West is an effort to increase the company's overall sales, which are stuck in neutral.

Mr. Sabia said Bell's acquisition of 360networks' assets will help underpin that effort. 360networks owns an advanced telecom network and sells services to businesses.

"Our growth in the West will be steep," Mr. Sabia said.

It is Bell's second large deal in Western Canada this year. In February, Bell took full control of Calgary-based Bell West Inc. in a $645-million deal with Manitoba Telecom Services Inc.

The acquisition of 360networks will give Bell connections to major business customers in the region's largest cities, including Vancouver and Calgary, increasing the intensity of its competitive push against Telus Corp., the dominant player in the West.

Vancouver-based Telus declined to comment on the deal.

At Telus's annual meeting in Toronto in early May, CEO Darren Entwistle said Bell has more to lose in its home territory of Ontario and Quebec than Telus has to lose in its established territory.

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"The logic is simple," Mr. Entwistle said. "The market we are pursuing in Central Canada is threefold the size of the market in Western Canada."

Bell's 360networks deal is driven in large part by tax losses, analysts said, the same as MTS's $1.5-billion bid to buy Allstream Inc. and Telus's $1.1-billion hostile move for Microcell Telecommunications Inc. 360networks' tax losses could save Bell an estimated $500-million in taxes next year, more than double the value of the deal itself.

"That's the major benefit here," said Greg MacDonald, an analyst at National Bank Financial Inc.

Bell is selling most of 360networks' Eastern Canadian customers to Call-Net, which will cost Call-Net about $13-million. The transaction is contingent on Bell closing the 360networks deal, expected by September.

The eastern network assets, but not the customers, will stay in the hands of Bell, which will manage them on behalf of Call-Net, and Call-Net has the option to buy them in two years. Approval from the Competition Bureau is necessary for the deal as a whole but Bell said it wouldn't be a problem.

Bill Linton, Call-Net president and CEO, said the deal will help it "greatly increase" its sales to businesses by about $50-million. Toronto-based Call-Net had sales of about $800-million in 2003, no change from a year earlier.

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"This might be the spark that they needed," said Iain Grant of telecom consultant SeaBoard Group.

With 360networks selling its domestic assets, it marks the end of the company's presence in Canada. Now based in Seattle, it began life in Vancouver in the late 1990s during the telecom boom with an ambitious goal to build a global fibre-optic network. The company ended up in creditor protection in 2001, a restructuring that was completed in 2002.

Greg Maffei, 360networks chairman and CEO, said ending the company's Canadian presence had "a note of sadness." The money will be used to help eliminate the privately held company's debt as it focuses all its efforts on the United States. The bulk of the assets being sold to Bell were once part of GT Group Telecom, which 360networks bought in late 2002 for less than $40-million.

Mr. Maffei said the sale is a "home run" but also a "win-win" because Bell gets the tax losses, which 360networks wasn't in a position to utilize.

Stock of BCE closed at $26.75 on the Toronto Stock Exchange, down 5 cents or 0.2 per cent. Telus stock fell 31 cents or 1.3 per cent to $22.89. Class B shares of Call-Net climbed 64 cents or 16.4 per cent to $4.55.

The Bell-360networks deal "absolutely makes sense" in two ways, said Brahm Eiley of Convergence Consulting Group Ltd. First, Bell eliminates a competitor that has pushed market prices lower, Mr. Eiley said.

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Second, Bell gets advanced network connections in the West to go head-to-head with Telus in the market for telecom services sold to businesses.

The deal, BCE said, will not affect its financial projections for 2004. Excluding the portion of 360networks going to Call-Net, Bell is picking up assets that produce annual sales of $100-million.

Mr. Sabia said the financial performance of Bell Globemedia, which owns The Globe and Mail and CTV television, continues to be very good.

"The Globe and Mail is improving in terms of its financial performance," he said, adding that CTV continues to perform well and that advertising revenue is good.

At the annual meeting, Mr. Sabia came under pressure during the question-and-answer period to settle a 12-year-old pay equity dispute, a thorny issue raised as last year's meeting in Montreal. It could cost the company as much as $400-million if Bell were to concede to the wage adjustment claims of 3,000 current and former workers, mostly operators, in Ontario and Quebec.

"For some people, [the amount owed]represents in excess of a year's pay plus pension adjustments," said Rocklee Johns, a former Bell operator who lost her job three years ago when the company outsourced the work to a U.S. company to cut costs.

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"I expect you to pay the bill in the same way that you would expect any subscriber to pay what they owe," said Ms. Johns, one of four former Bell workers who showed up at the annual meeting to press their claims for a settlement.

In responding to the issue, which is currently before a Human Rights Tribunal in Ottawa, Mr. Sabia said he couldn't disclose what the company has already offered to resolve the dispute, but added that it is a "very, very reasonable offer. . . . I want to get this resolved."

Separately, BCE agreed to adopt a shareholder proposal that would require the company to disclose the previous directorships of each of its directors over the past five years, a motion it recommended shareholders vote for. The aim is to put shareholders in a better position to form an opinion about the quality of the directors who represent them.

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