MTS seeks U.S. investor for its Allstream business-services unit

Manitoba Telecom Services (MTS) (Toronto: MBT.TO) is searching for a U.S.-based investor for its Allstream business services unit, following failed attempts to secure a Canadian investor.

The Winnipeg, Canada-based service provider, according to a report in The Globe and Mail, is now in discussions with Morgan Stanley (NYSE: MS) and CIBC investment bankers with a particular focus on potential U.S.-based investors, according to people close to the situation.

Its move comes on the heels of the Canadian government's recent announcement to let non-Canadian-based companies to acquire service providers that have a market share of only 10 percent or less. The Globe and Mail report said that the new rules, which are part of Canada's federal budget bill, will take effect when the proposed law gets royal assent sometime later this month.

At this point, MTS has not specified a timeline to sell Allstream, formerly known as AT&T Canada (NYSE: T) in 2004.

There appears to be a difference in opinion on how much the assets are worth. While some analysts believe MTS could get CAD800 million (USD781 million) to CAD 900 million (USD878 million), inside sources think an interested party would probably offer up CAD400 million (CAD390.4 million).

While Globalive Wireless Management Corp. expressed interest in the unit they ultimately decided to pass in November, 2011. What's more, all of the country's largest telcos and cable operators BCE, Telus, Rogers and Shaw Communications expressed no interest in buying the unit.

One of the attractive elements of Allstream is its national fiber network, which currently reaches into 2,487 buildings to deliver a suite of IP-based Ethernet and voice services to area businesses. The only drawback that comes with Alllstream is that they'd have to maintain its legacy long-distance voice business, which still accounts for almost 70 percent of the service provider's revenue.

"It's a messy deal if you don't want all of the assets," said one source.

For more:
 - The Globe and Mail has this article

Related articles:
MTS Allstream earnings reach $53M on IPTV, business services increase
MTS Allstream rides wave of IPTV, IP business sales in Q4 2011
Allstream adds nearly 300 fiber-fed buildings to network in Q4 2011
Infonetics: Service provider 40G/100G optical transition gains momentum

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