Manitoba Telecom Services Inc. has finally concluded the long path to the sale of its Allstream unit.
The Winnipeg-based company said Friday it completed its $465-million deal to sell the division to U.S. fibre-optic network operator Zayo Group Holdings Inc.
"We are pleased to successfully conclude this transaction and fully deliver on our commitment to complete the turnaround and planned exit from Allstream, with the value of the business fully realized," MTS chief executive officer Jay Forbes said in a statement.
He added that the sale was an "important milestone" for the company and its responsibility to shareholders and said the focus would now be on his multiyear program to transform MTS itself, the Manitoba telecommunications business.
MTS will realize net proceeds of $420-million after closing costs, the company said in the statement, noting that the amount is $15-million more than what it expected to receive as net proceeds under a previous, failed attempt to sell Allstream in 2013.
The federal government blocked that deal to sell to Egyptian investment firm Accelero Capital Inc. on national security grounds.
This time around, executives said they spent months working to understand the concerns of all relevant stakeholders in Ottawa in an effort to ensure a sale would not get thwarted again.
On Monday, the Competition Bureau and the Ministry of Innovation (previously known as Industry Canada) both confirmed to The Globe and Mail they did not plan to take steps to block the transaction at this time.
MTS said Friday it is evaluating options for how to use the proceeds, considering retiring debt used to make a pension funding prepayment as well as cellular spectrum licence purchases in 2015. It said it would share more detail on these plans when it reports its fourth-quarter results on Feb. 4.
In a note to clients titled "One down, one to go?" Canaccord Genuity analyst Sanford Lee said now that the deal has closed, investor focus will be on the potential sale of MTS itself to one of Canada's largest wireless carriers.
There are some signs that such a transaction could be acceptable to the federal government, Mr. Lee wrote, such as the sale last summer of new entrant wireless carrier Mobilicity to Rogers Communications Inc. and transfer of spectrum to Wind Mobile. Plus, Shaw Communications Inc.'s recently announced deal to purchase Wind, suggests the goal of achieving a sustainable fourth wireless player in most regions has been achieved.
However, he cautioned that issues like concentration of wireless subscribers (MTS has more than 50 per cent of mobile customers in Manitoba) as well as spectrum ownership could still stand in the way of government approvals for any sale to an incumbent.
"In spite of these issues, MTS shares will likely continue to trade on take-out speculation rather than on fundamentals," Mr. Lee concluded.
Allstream sells communications services to enterprise clients and operates a 30,000-kilometre fibre-optic network across Canada. U.S. telephone giant AT&T Inc. was once an investor in the company, which was previously known as AT&T Canada.
MTS bought Allstream in 2004 after it emerged from a restructuring process for $1.7-billion but has long struggled to make it profitable. MTS said last year that it will record a loss of $75-million to $90-million on the sale.