Bell, Call-Net divide up 360networks

Bell Canada Wednesday said it would buy the Canadian assets of Vancouver-based 360networks, effectively doubling its footprint in Western markets, the stomping ground of chief

rival Telus.

Bell has offered $275 million for 360networks, including its subsidiary Group Telecom Services Corp. 360networks and GT will operate as divisions of Bell Canada.

“”By having the assets and networks of 360 in Western Canada, that allows us access on what will then be our own network into roughly an incremental 200 buildings and roughly doubling our network access to customers in this market,”” said Bell Canada CEO Michael Sabia during a conference call. “”As a result of that, we think we will be able to be an even more vigorous competitor than we have been.””

It’s an opportunity to quickly expand Western markets without having to invest new capital, added Sabia. Bell Canada originally formed its Bell West operation two years ago by combining the assets of Bell Intrigna and the western operations of Bell Nexxia. The 360 acquisition will effectively double Bell West’s employee headcount to 1,200.

“”It’s with a note of sadness that we are exiting that business but the consolidation in telecom is a worldwide phenomenon and a trend that is will continue,”” said 360 CEO Greg Maffei. He added that, “”Bell’s appetite and our willingness met to a point where a transaction could get done.””

360networks and Bell West have worked together in the past, notably on the Alberta Supernet project.

In a second major deal, Bell Wednesday said it will sell some of the assets of 360networks to Call-Net Enterprises — which owns Sprint Canada — including portions of its business and customer base in Eastern Canada, as well as network facilities in Ontario, Quebec and the Maritimes.

Financial terms of the Call-Net transaction were not disclosed, but the company will inherit a significant business and customer base in the affected provinces. The deal will give Call-Net access to 1,000 office buildings, in some cases reducing the firm’s reliance on leasing agreements.

“”It’s one of those things where you come down and say, who are the winners and losers? The winner, without question, is 360networks,”” said Gartner Group analyst Elroy Jopling.

“”Bell Canada paid a premium for what they got, even after what they sold off. At the same time, it gives them very significant positioning in Telus’s territory. Telus would be one of the losers. It’s been slow in getting into the east.””

Call-Net will also enter into a two-year transitional agreement with Bell to provide technical services to the new set of customers and will receive 70 per cent of the total retail revenue.

Call-Net has an option to buy facilities and assets related to the customer expansion after two years — an option that is a “”very attractive transaction for us,”” said Call-Net CEO Bill Linton, and one that the company intends to exercise.

360networks suffered in the telecommunications meltdown that claimed numerous CLECs in the late 90s and early part of this decade. The firm filed for bankruptcy protection and was delisted from the NASDAQ stock market in 2001, but experienced a reversal of fortune by 2003. It bought Group Telecom for less than $40 million in February 2003. Most recently, Group Telecom partnered with U.S. telco Vonage to launch phone and Internet service in Canada.

Linton had no comment on which, if any, of GT’s prior partnerships Call-Net will inherit as a result of Wednesday’s announcements.


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