Rogers to pay BCE $392-million in shared Glentel venture

Share

Rogers Communications Inc. will pay BCE Inc. $392-million in cash as part of a deal the two struck to share control of cellphone retailer Glentel Inc.

BCE said Thursday the payment means its own cash position will actually increase by $95-million as a result of the Glentel transaction. (BCE owns 15 per cent of The Globe and Mail.) BCE first said in late November it planned to acquire the Burnaby, B.C.-based company in a $594-million deal, half in cash and half in stock. But late in the day on Dec. 24, BCE and Rogers announced plans to form a joint venture for control of Glentel after Rogers agreed to drop a court challenge it launched to block BCE's takeover.

The financial terms of that deal were not revealed at the time, but BCE said in its quarterly earnings filing Thursday that Rogers will pay it $392-million in cash.

"After BCE funds the $297-million cash portion of consideration on the Glentel transaction, BCE's net cash position will in fact improve by $95-million, so our liquidity and financial position will be strengthened as a result," the company's chief financial officer Siim Vanaselja said on a conference call Thursday morning.

He said the Rogers agreement will reduce the net effective cost to BCE of acquiring its 50-per-cent interest in Glentel to $202-million.

"We think that's really good value for securing this distribution channel, particularly as we head into a period of increased volumes of wireless subscriber contract expirations," Mr. Vanaselja said.

Points of sale will be important as the Canadian wireless industry approaches what is being called the "double cohort" later this year, when a higher-than-usual number of contracts will come up for renewal. Starting in June, three-year contracts that customers signed before a national wireless code limited contracts to two years will expire at the same time as a wave of two-year plans.

Glentel distributes both BCE and Rogers products through its Canadian retail locations operating under names such as Wirelesswave and Tbooth wireless.

When the deal was announced in November, Glentel had 494 Canadian locations but many of those were kiosks in Target Canada stores, which will close as the company exits the country. Excluding those outlets, BCE said Thursday Glentel will have 368 Canadian locations.

Rogers claimed in a court filing on Dec. 17 that Glentel needed its consent to a change of control. Glentel disputed the claim, arguing approval of the deal was up to its shareholders, not one of its suppliers.

BCE's deal to acquire the independent retailer, which also has 735 locations in the U.S. and 147 in Australia and the Philippines, was seen as a move to gain an edge on distribution of its Bell Mobility and Virgin Mobile Canada-branded products, even though the company said it would continue to sell Rogers devices and services (as well as its Fido and Chatr brands).

The Rogers court filing alluded to the possibility that once the retailer was owned by BCE, it would favour the sale of Bell Mobility or Virgin products and services over those of its competitor.

The two companies will now share control over the retailer when the transaction closes. Glentel shareholders approved the deal on Jan. 12 and a court approved it on Jan. 14.

However, the Competition Bureau must also approve the transaction. Pending that, BCE said Thursday it expects the deal to close in the spring.

Mr. Vanaselja said Thursday that Glentel will continue to operate as an independent distributor with independent management once the deal closes.

Including minority interests and the assumption of Glentel's net debt, a total of $78-million, the total deal is worth about $670-million.