Bell agrees USD3.1bn MTS takeover; Telus to acquire portion of Manitoban customers

3 May 2016

Bell Canada Enterprises (BCE) has agreed to acquire 100% of provincial full-service telco Manitoba Telecom Services (MTS) in a transaction valued at around CAD3.9 billion (USD3.1 billion) including debt, whilst as part of measures to gain regulatory approval for the deal BCE has also agreed to offload one-third of MTS’ post-paid wireless customers to rival nationwide operator Telus.

Bell has pledged to invest CAD1 billion over five years after the transaction closes to expand high speed fibre and 4G LTE networks and services in rural and urban locations across Manitoba. The group plans to rename Manitoban operations as Bell MTS, whilst MTS’ Winnipeg head office will become Bell’s Western Canada headquarters, with the addition of MTS’ 2,700 staff swelling Bell’s Western team to 6,900 employees.

BCE intends to acquire all issued and outstanding common shares of MTS for approximately CAD3.1 billion – CAD40 per share, paid with a combination of BCE shares and cash – while assuming MTS’ outstanding net debt of approximately CAD800,000. The Board of Directors of MTS has approved the transaction whilst MTS shareholders will vote in late-June. BCE and MTS aim to close the deal by the end of 2016 or early 2017, subject to shareholder, court and regulatory approvals.

In a subsequent announcement, BCE said that it will divest one-third of MTS’ post-paid wireless subscribers to Telus following the completion of Bell’s acquisition of MTS, whilst also assigning one-third of MTS dealer locations in Manitoba to Telus, subject to regulatory approvals.

MTS last year offloaded its national long-distance/corporate division Allstream to US-based Zayo for CAD465 million, but winning approval for the sale of the parent telco is not guaranteed. Reuters quotes industry insiders indicating that regulatory approval will not be automatic and may require further concessions from BCE, whilst Bloomberg quotes experts highlighting that the deal goes against a previously-established policy of the Conservative government – recently succeeded by a Liberal administration – based on establishing four strong wireless competitors in each regional market (in Manitoba’s case, MTS, Bell, Telus and Rogers). MTS controls marginally over half of Manitoba’s wireless subscriber market, whilst it is the dominant fixed line/broadband operator in the province.

BCE is Canada’s largest communications group, posting quarterly operating revenue of CAD5.270 billion in Q1 2016, up 0.6% year-on-year, driven by solid wireless, residential fixed broadband and media division growth. At 31 March 2016 Bell served a total of 8,235,963 wireless customers, up 1.6% y-o-y (including 7,401,221 post-paid customers, an increase of 3.6%); total TV subscribers of 2,748,495, up 3.4% (including 1,230,531 fibre-fed ‘Fibe TV’ customers, an increase of 24.3%); high speed fixed internet subscribers of 3,411,246, up 3.4%; and total active fixed voice access lines of 6,565,508, a decrease of 6.4%.

Canada,Bell Canada Enterprises (BCE), Bell MTS (formerly MTS), Telus Corp (old), Telus Corporation,

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