Bell, Aliant unite for regional telecom opportunities

Canada’s largest telecommunications company strengthened its foothold in the Maritimes Tuesday when Bell Canada Enterprises said it will form an income trust that includes the assets of Aliant and acquire the East coast carrier’s wireless operation.

The still-to-be-named entity will control more than 3.4 million lines in Ontario, Quebec and Atlantic Canada, and 400,000 high-speed Internet customers in six provinces. It will be run out of Aliant’s existing headquarters in Halifax. No job losses are expected as a result of the transaction, the companies said. BCE — which already owns 53.2 per cent of Aliant — had already formed an income trust comprising its wireline operations in Ontario and Quebec last month, which will be folded into the new trust along with Aliant’s wireline operations and a majority interest in Bell Nordiq Income Fund.

The deal comes only a day after major telecom consolidation south of the border between AT&T, which bought BellSouth for US$67 billion.

Bell chief executive Michael Sabia said the income trust will have a management team that will be structured so that it operates close to the various communities it serves. Aliant will maintain regional offices in Ontario and Quebec, for example, as well as the Atlantic provinces. 

“It will be big enough to provide customers with latest technology but close enough to give them the service they have every right to expect,” Sabia said in a teleconference call. “It has always been part of our plan as we began working on the issue of how best to serve regional markets in a relatively low-density country like Canada that we would attempt to create a regionally focused player of meaningful scale.”

The acquisition of Aliant’s wireless business, meanwhile, will speed Aliant customers’ access to wireless products and services, Sabia said.

“It will strengthen our national wireless strategy, but also improve the delivery of wireless in Atlantic Canada, where we will bring the benefits of scale to wireless customers in this market,” he said.

Like Bell, Aliant recently said it would spend $20 millions rolling out evolution data-optimized (EVDO) network technology from Nortel to urban centres this year, with complete coverage by the end of 2007. Jay Forbes, Aliant’s chief executive, hinted that the transaction with Bell could see that schedule pushed up.

“The focus that this new income trust will place on the wireline business bodes well for continued broadband expansion,” he said. “Over and above that, with the introduction of services like EVDO, by combining Aliant Mobility with Bell, the hope is we are going to be able to use that scale for quicker rates of introduction in all the markets in Canada.”

Gartner Canada telecommunications analyst Elroy Jopling said the rationale behind the deal has more to do with shareholder value and how BCE can improve the price of its stock than anything else.

“They may talk of customer focus and that, but I guess they kind of have to,” he said. “For Aliant, it may allow the organization to have greater control over a wider territory. Will we see any new products and solutions coming out because of this deal? Probably not.”

Beyond core telecommunications and Internet services, the deal raises questions about the future of Xwave, a major Canadian integrator which is owned by Aliant. Forbes said the regional nature of the income trust was designed to bring more focus to small and medium-sized businesses in Canada.

“It will be a solidification of the importance of those operations,” he said. “We already have an Xwave office in Toronto, and the addition of the small and medium business segment in Ontario and Quebec will allow them to further deliver IT solutions to this new market.”

Over the last two years, however, Bell has acquired a number of smaller integrators, including Charon Systems, CSB and Nexxlink which already serve SMBs.

“Most of what is Aliant is SMB. Bell has its own SMB group and the question is what will they continue to do and what will Aliant continue to do?” Jopling said. “Xwave will stay with the trust . . . A firm like Xwave definitely can fit, how it will fit is yet to be determined.”

A spokewoman for Xwave did not return calls for comment at press time

BCE is expected to reduce its stake in the income trust from 73.5 per cent indirect interest to 45 per cent.

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