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Entrepreneurs in the ailing telecom sector are turning to boomerang buyouts, where they repurchase businesses that they sold to bigger firms at the height of the boom years for a fraction of the original price tag.

Larry Baldachin is one of the latest practitioners of the boomerang buyout. This week, the Toronto entrepreneur bought back Liberty Technology Services Ltd., which creates corporate portals and other Web sites, from his employer Norigen Communications Group Inc.

Norigen, a private firm providing telephone, Internet and wireless services across the country, was placed into receivership earlier this month and has started to shut down its operations, according to receiver PricewaterhouseCoopers (PwC).

Mr. Baldachin, Liberty's president, was able to buy low after selling high, getting about an 80-per-cent discount from the price that Norigen paid in stock and cash for the business in August, 2000. Even so, the decision to buy back Liberty rather than start a new firm was a tough one, he said. The clincher was that he would be able to head a company with an established customer list and experienced employees, he said. "I'd never get the same people together again."

Mr. Baldachin acknowledged that it is a difficult time to be re-entering the Internet services market. "The trick now is just surviving the downturn."

Analysts said buying firms on the rebound can be a risky proposition since employees can worry about job security and wary customers can yank their business. But for the entrepreneurs involved with the original firm, it may be the only way to enter their former market. "Going back and saying 'Trust me this time' is quite hard," said Iain Grant, managing director of Yankee Group in Canada.

Ashok Kalle has already discovered the perils of the boomerang buyback first hand. His Internet services firm, Pathway Communications Inc., had 25,000 dial-up Internet access customers when he sold it to Axxent Inc. (then named OCI Communications Inc.) in July, 1999.

Axxent, another upstart telecommunications firm, was put into receivership in late April with PwC appointed as receiver. Axxent, like Norigen, has also begun to shut down its operations.

When Mr. Kalle bought back Pathway in late June, the dial-up business had shrunk by more than a quarter with just 18,000 subscribers, he said, a result of customer concern over the long-term availability of the service.

It was, Mr. Kalle noted wryly, a "slimmer version" of the company he had sold to Axxent. But the price Mr. Kalle paid was just a "very small fraction" of the value of the stock and cash he received in 1999.

Mr. Baldachin sold some of his Norigen stock before the shares tanked earlier this year, but Mr. Kalle said he still has his Axxent shares.

Mr. Kalle had tried to launch a new startup to provide wireless Internet access, but dropped that effort in favour of a renewed relationship with Pathway when Axxent was placed in receivership. "I was the first person to call up the receiver," he said.

Andrew Wilczynski, a senior vice-president of PwC, said he could not comment on whether there were other bidders for the Pathway and Liberty units.

Ian Angus, president of Angus Telemanagement Group Inc., said neither unit was fully integrated with the parent company, making it comparatively easy to spin them out to the original owners.

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