Background
On January 7, 1999, AT&T Canada announced a restructuring resulting in the creation of a trust which removed the former bank shareholders (Scotiabank, TD Bank and Royal Bank of Canada) of AT&T Canada Long Distance. At that time, AT&T Canada integrated ACC Canada into the company and announced that $800M was being allocated to enter the local telephone business. On May 20, 1998, Metronet announced an agreement to acquire Rogers Telecom, in a deal which gave Rogers Communications cash plus 12.5 million shares of Metronet and 2 of the 11 Metronet board seats. As a result of that transaction, Metronet became Canada’s leading Competitive Local Exchange Carrier (CLEC). Both Metronet and AT&T Canada focus on the business market.
A Solid National Player
The AT&T Canada – Metronet deal puts together a national powerhouse, operating coast-to-coast with local, long-distance and data facilities in virtually all of Canada’s biggest cities. AT&T Canada is a national, facilities-based long distance company, having led the regulatory battle to introduce competition in the early 1990’s, when it was operating as Unitel (owned then by Rogers and Canadian Pacific). AT&T Canada traces its roots to the railroad telegraph companies in the 1840’s. The combined company will have revenues of $1.4B, more than 4000 employees and $3.5B in assets (all figures Canadian). It is in the midst of building a new high-speed fibre network.
The merged company will be the first company operating nationally to offer local and long distance voice, data, Internet and electronic commerce services. It is interesting that the announcement also included wireless services through Cantel AT&T. To date, Cantel has been the wireless unit within the Rogers Cable empire, operating under a marketing agreement with AT&T. The recent acquisitions of major US cable companies by AT&T raises the question of whether Metronet is just one step for AT&T.
Bell Canada / MCI Worldcom
The announcement comes on the heels of yesterday’s announcement that Bell Canada has reached an agreement that provides exclusive Canadian rights to offer MCI WorldCom’s products and gives the US company broader access to Canada. That relationship replaces an agreement MCI Worldcom had with the now defunct Stentor alliance.
Summary
AT&T Canada Corp will be a serious national contender, offering a significant portfolio of services to businesses coupled with the world’s most powerful telecom brand name. As a result of this merger, it will be much more difficult for competitors to operate only regionally and compete in the lucrative business market. Further consolidation among wireline and wireless companies can be expected as former Stentor members Bell and BCT.Telus “bulk-up” for the battle in each other’s territory.