Toronto -- Cash-strapped Rogers Communications Inc.,
owner of Canadian MSO Rogers Cablesystems, has raised $428 million by selling its Rogers
Telecom business-telephone division to MetroNet Communications Corp., a newcomer that
wants to offer competitive local telephony in Canada.
Under the deal, MetroNet gets access to more than 1,350
buildings and to a fiber optic network more than 2,125 miles long that covers
Canada's major business centers.
Meanwhile, Rogers gets the cash, plus a 31 percent share of
MetroNet. The money is intended to help pay down some of Rogers' $4 billion in debt.
The deal drew favorable reaction from
telecommunications-industry analysts such as Toronto's Ian Angus. "It's one
of those deals that seems awfully logical when you look at it," Angus said. "The
result is that Rogers gets a whole lot of cash to help pay down its debt -- which it
certainly needs -- and it gets a share of MetroNet, a company that has shown that it
pretty much knows what it's doing in this business."
Goldman Sachs & Co. analyst Lou Kerner, who follows
Rogers primarily as a cable operator, upgraded the stock to "market outperform"
from "market perform." He said the deal was "great for Rogers." The
company got a very good price for the telecommunications assets, it will address its
leveraging and, crucially, it showed that it is willing to part with assets, Kerner said.
Meanwhile, MetroNet, which is already Canada's largest
competitive local-exchange carrier, gets a ready-built network, customers and cash flow,
and it eliminates a competitor. More important, the deal puts the local-telephony entrant
in much better shape to take on the Stentor group of established local-telephone networks,
Rogers officials said the sale won't rule out the MSO
offering local-telephone service to its cable subscribers.
"We still retain the right to get into local
residential telephony," said Jan Innes, Rogers' vice president of
communications, "and we're still looking at the opportunities in that
Although the company hasn't announced any formal plans
yet, Rogers is still considering whether to use Internet protocol to deliver local
services over coaxial, wireless, or both. So, the sale of Rogers Telecom -- which uses
more traditional telephone-network equipment -- doesn't necessarily tie its hands,
the company said.
Kerner said the MetroNet connection will probably be of
more use to Rogers in launching residential telephony than its own Rogers Telecom unit
would have been.