Manitoba Telecom Services has Allstream unit back in its fold with no other buyer

Manitoba Telecom Services Inc. hasn’t lined up another buyer for its Allstream division and instead expects the business unit to regain the momentum it had before a $520-million deal to sell it to a foreign buyer was blocked by Ottawa.

CEO Pierre Blouin said Thursday that 40 per cent of Allstream’s revenues come from its Internet protocol services and that it has a solid foundation for growth.

“We restructured parts of the business, moved Allstream to a more independent footing and further improved its cost structure,” Blouin told financial analysts after the company reported a lower third-quarter profit.

“On a lighter note, we now have gained huge brand recognition for Allstream with all of the media attention it received. The result is that we go forward with a positive outlook,” he said, not mentioning the possibility of another sale.

Blouin, who reiterated that the federal government’s decision to block the sale came as a surprise, said he wants to get Allstream’s performance back to where it was in 2012 before the sale process started and the five-month review by Investment Canada began.

He said Manitoba Telecom will provide WiFi service — short-range wireless network service — to Winnipeg’s libraries, arenas, recreation centres and sites over the next two years.

In early October, federal Industry Minister James Moore, acting under national security provisions of the Investment Canada Act, rejected the proposal to sell Allstream to Egyptian investment group Accelero Capital.

Accelero was co-founded by Naguib Sawiris, an Egyptian businessman who was instrumental in financing the start up of small Canadian wireless company Wind Mobile when he headed Orascom Telecom Holding.

Allstream, with about 2,000 employees, provides Internet services to about 50,000 businesses, Canadian government installations and facilities and to some provincial governments.

Formerly an independent company created after AT&T Canada restructured, Allstream competes in the business telecom market against Bell Canada, Telus and the other large Canadian telecommunications carriers.

In its financial results, Manitoba Telecom Services (TSX:MBT) posted a lower third-quarter net profit of $25.4 million or 38 cents per share, down from $33.2 million or 50 cents in the same quarter last year.

Revenues for the regional telecom company were down 3.7 per cent to $408.4 million from $424.3 million.

Operating revenues for MTS, which includes its wireless, Internet and cable services, were $252.7 million, an increase of 2.5 per cent from $246.6 million in the same quarter in 2012.

Blouin noted that MTS has more than 100,000 Internet protocol TV customers.

The MTS division increased its wireless revenues to $95.2 million, up from $91.5 million year over year. It currently has almost 497,000 wireless customers in Manitoba compared with 494,564 at the same point in 2012. Average revenue per user is $62.35, up from $60.58 in 2012.

For its Allstream business division, operating revenues were $164.1 million, down 12 per cent from $186.2 million.

Transaction and restructuring costs associated with the transaction amounted to $12.9 million and $8.8 million in the second and third quarters, respectively. A required writedown of Allstream’s long-term assets resulted in impairment losses of $107.7 million and $22.7 million, recognized in the second and third quarters of 2013, respectively.