Manitoba Telecom Services launches strategic review of Allstream business

WINNIPEG – Manitoba Telecom Services Inc. (TSX:MBT) said Thursday it is launching a strategic review of its Allstream business division, opening up the possibility of a sale of the business.

The company said recent changes by Ottawa to allow increased foreign investment in smaller telecommunications companies have created a “logical opportunity to consider a full range of alternatives that could be undertaken to further enhance Allstream’s growing competitiveness.”

“With a clear strategy, strong traction in the growing market for IP services, and seven consecutive quarters of year-over-year EBITDA growth, Allstream is the strongest it has been in years,” chief executive Pierre Blouin said.

“For this reason, it is important to understand that this process is wide-ranging and does not assume that any significant change is necessary or desirable.”

Strategic reviews by companies are often a prelude to a sale or other transaction.

MTS Allstream, which said the process will occur over the course of the coming year, has hired CIBC World Markets and Morgan Stanley as financial advisers for the review.

Analysts have suggested in the past that a U.S. company such as AT&T or Verizon may make sense as potential buyers.

Manitoba Telecom Services acquired Allstream, formerly AT&T Canada — which faced restrictive rules when it was operating in Canada — for $1.7 billion.

The Allstream division provides Internet Protocol services such as voice and data to businesses in Canada and parts of the United States and has said growth in the division will be led by such services.

The business competes with Bell (TSX:BCE) and Telus (TSX:T) for business customers.

Winnipeg-based MTS Allstream earned a second quarter profit of $44.5 million, or 67 cents per share, in its second quarter, down from $49.8 million, or 76 cents per share in the same period last year.

Revenue for the three months ended June 30 came in at $431.6 million, down from $443.7 million year over year.

Shares in the company were down 37 cents at $33.58 on the Toronto Stock Exchange on Thursday.