Primus Telecommunications has bought the majority shares of Globility Communications, the first of an expected wave of acquisitions

First telco falls under new investment rules

In what is believed to be the first takeover of a Canadian telecom company since Ottawa changed the ownership rules last month, the U.S. parent of a Canadian service provider has bought Globility Communications Corp.

Primus Telecommunications Group Inc. of McLean, Virginia already owned 45.6 per cent of Globility, but this morning said it has bought the remaining 54.4 per cent of the company.

Primus is the parent of Primus Canada, which will integrate the acquisition.

Under the foreign telecom investment rules, only Canadian-controlled companies could own telecom networks. Primus’ partnership with Globility allowed the company to get around that in part. In fact Primus was Globility’s largest customer.
“With the change in the foreign ownership rules we now have the ability to own transmission facilities,” explained Andrew Day, CEO of Primus Canada.  Because Globility has co-location facilities in a number of major Canadian cities “it gives us the ability to go after a better cost structure and then pass that on to the (business) consumer.”

It will also let Primus Canada grow its footprint for on-net local, DSL and Ethernet services, he said, expand into an all fibre-optic network. Globility had already started building a fibre ring around Ottawa, which will be finished by the end of September. Primus Canada hopes to do the same in other Canadian cities.

“The recent changes to the legislation have made this acquisition possible, giving Globility much greater latitude to expand its telecom infrastructure across Canada, including the construction of high capacity, state of the art metro fibre,” Peter Aquino, president and CEO of Primus Telecommunications Group (PTGI), said in the release “This will enable PTGI with its Globility brand to launch its owned fibre transport initiative commencing construction of a central business district ring in Ottawa immediately.”
 
In an omnibus bill attached to the federal budget, the Conservative government changed the Telecommunications Act allowing foreign companies to buy all of a Canadian telecom provider if it has less than 10 per cent of the revenues of all telecommunications carriers.
 
 
Publicly-traded PTGI [NYSE: PTGI] owns and operates a global broadband network broadband, including fibre and data centers located in Canada.
 
Globility is a small competitive local exchange carrier (CLEC) which provides VoIP and PSTN services to businesses in Toronto, Hamilton, Oshawa, Ottawa, Calgary Vancouver and Montreal. Through a division called Mipps Inc., a fixed wireless provider,  it held spectrum that Primus Canada hoped to use to offer WiMAX-based wireless service to southern Ontario.  Ultimately Primus Canada gave up on that project as the wireless industry turned to LTE.
 
Mipps had hoped to buy wireless spectrum in the 2008 AWS auction, but withdrew from bidding. Last year Mipps sold the licenced spectrum it owned to an undisclosed Canadian company for $15 million, Day said.
 
Primus Canada is one of the country’s biggest independent Internet and co-location providers. In March began offering high speed Ethernet service over copper lines for small and medium businesses in three Eastern Canadian cities
 
In an email telecommunications consultant Iain Grant of the SeaBoard group said the move is interesting in that it means Primus Canada is expanding. “They have been quiet for too long,” he wrote.
 
 
Last week Primus Canada opened a new 30,000 sq. ft. data centre in the Toronto area, its eighth in the country. The centre meets the Uptime Institute’s Tier III certification for design and construction. Primus says that means the centre will never be shut down for maintenance or to replace any element of the capacity or distribution. Other data centres are located in Vancouver, Edmonton London, Ont. and Ottawa.
 
 
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