MTS settles with Bell for $75 million

Manitoba Telecom Services Inc. (MTS) on Friday announced it would sign a $75 million settlement deal with BCE Inc., in a move to resolve recent lawsuits that Bell had brought against the firm.

Bell took issue with the April announcement from MTS that it was acquiring Allstream Inc. for $1.7 billion. Under the terms of the deal, MTS would gain Allstream’s fibre network and the ability to offer IP-based services such as voice over IP (VoIP) and IP multiprotocol label switching (IP-MPLS). MTS announced approximately one month ago that the deal had closed at $1.5 billion.

Bell Canada has opposed the deal since it was announced, even going so far as to take its complaints before the Ontario Superior Court, asking for an injunction. Bell — which owns approximately 21 per cent of MTS — said the Allstream acquisition would cause MTS to breach rights Bell had under previous agreements.

According to a statement issued by BCE, the settlement means that Bell will continue its acquisition of MTS’ 40 per cent interest in Bell West by August 3. (MTS said it will receive $645 million for this deal.) Bell also intends to divest its interest in MTS, the statement said.

Terms of the settlement include:

– A $75-million payment from MTS to Bell, “in consideration of the early termination of commercial agreements” between the two firms.

– Should a change of control of MTS occur before January 1, 2006, MTS will offer Bell a premium payment.

– MTS and Bell will compete “freely” with each other in Canada

– Bell will be MTS/Allstream’s preferred supplier of wholesale services, and MTS/Allstream has extended wholesale services to Bell on a preferred supplier basis.

– Finally, until 2006, existing cellular agreements between the two telecoms will remain intact.

“We are pleased to have reached a practical resolution with Bell Canada,” said Bill Fraser, CEO of MTS, in a company statement. He added that the company will now continue with its efforts to combine MTS and Allstream.

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