Canadian government rejects MTS Allstream sale to Accelero, citing security concerns

The Canadian government has put the kibosh on Manitoba Telecom Services' (MTS) plans to sell its Allstream division to Cairo, Egypt-based Accelero Capital Holdings.

The proposed sale was seen as a test of a new, more relaxed government approach to outside investment in Canadian telecommunications. Its rejection "surprised and disappointed" MTS, which maintained "this transaction is to Canada's net benefit and to the best of our knowledge would not be injurious to national security."

In fact, the carrier said, it thought it was moving in a direction the country wanted.

"We pursued this transaction, with Accelero as our partner, in direct response to the federal government's stated policy objectives of increasing forging investment and driving greater competition in Canada's telecommunications sector, so this result is very difficult to understand or accept," MTS Allstream CEO Pierre Blouin said in a statement.

The proposed acquisition was announced last May. In the ensuing time, "MTS and Allstream have responded openly and constructively to Industry Canada's requests for information … and Accelero has proposed far-reaching, comprehensive and binding undertakings to the Canadian government, including a commitment to invest $300 million over three years to pursue Allstream's capital plans," the press release said.

Accelero was co-founded by Egyptian billionaire Naguib Sawiris who is no stranger to the Canadian market, having provided financial backing for Wind Mobile Canada, the Toronto Globe and Mail reported.

"The federal government's past active support of Accelero's principals played a significant role in MTS Allstream's decision to sell to Accelero," the press release said. "The company was also heavily influenced by the fact that the proposed transaction is entirely consistent with recent changes in federal policy aimed at increasing foreign direct investment in Canada's telecom sector."

With the transaction out the window, MTS said it would again report Allstream as part of its consolidated results and that these results would be impacted by about $35 million of non-recoverable, transaction related expenses and restricting costs.

For more:
- MTS issued this press release
- and the Toronto Globe and Mail carried this story

Related articles:
Manitoba Telecom sells off Allstream for $540 million, will focus on telecom, IPTV
MTS Allstream's Q1 broadband, converged IP revenues rise to $53.5 million
Canadian carriers, CEOs oppose potential Verizon entry into wireless market

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