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The government’s decision to block the sale of the Allstream division of Manitoba Telecom Services to an Egyptian telecom mogul could limit the pool of potential foreign buyers for troubled smart phone maker BlackBerry Ltd., according to industry watchers.

In a ruling announced on Monday, Industry Minister James Moore said the government has turned down an attempt by Accelero Capital Holdings controlled by Egyptian businessman Naguib Sawiris, to purchase Allstream.

MTS wants to sell the fibre optic network so that it can focus on providing wired and wireless services in its home province. Last year, Ottawa relaxed its foreign telecommunications investment rules so that investors from abroad can bring money into the industry and bolster competition.

News of the rejection caused MTS shares to drop 8.6 per cent in Tuesday, but Ottawa’s decision may have negative repercussions for BlackBerry’s search for a buyer as well said Ross Healy, portfolio manager with MacNicol & Associates.

He said the decision signals that Canada is open for business but its assets are not going to be given away to the “first person who comes in the door with a bit of money.”

BlackBerry’s most sensitive asset – its secured network which handles millions of corporate and government communications each day – will likely be sold to North American entities, said Healy.

Ottawa has rarely used its veto power in the sale of Canadian businesses to foreign entities. In 2010 it blocked the $39 billion bid by Anglo-Australian mining giant BHP Billiton for Potash Corp. IN 2012, Ottawa blocked the attempt of MacDonald Dettwiler and Associates Ltd., to sell its satellite division to Alliant Techsystems Inc. on the grounds of national security concerns.

The government, however, did not provide any explanation for its blocking the Allstream sale.

National security provision will likely be “considered and applied” to BlackBerry and the government will be very selective with regards to the company’s potential purchasers, said Tony Baldanza, head of law firm Fasken Martineau’s antitrust and competition law group.

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