Atria buys Telecom Ottawa for $63 million

The largest fibre provider in Central Ontario has purchased the telecom assets of Hydro Ottawa Holding Inc.

Atria Networks LP will pay $63 million for Telecom Ottawa in a transaction slated to close early this year. According to Hydro Ottawa, the city-owned utility holding company will make a $20-million profit after liabilities and closing costs.

The deal came together very quickly, said Steven McCartney, CEO of Atria. The City went public with its desire to sell the property in early December. “In terms of these types of things, it’s been a very short time,” McCartney said.

“It was an assertive timeline, but still provided scope for an extensive process,” said Hydro Ottawa spokesman Nathan Benson. “We went out fairly broadly to solicit interest and received a number of offers.” Hydro Ottawa approached 38 potential investors; 27 requested bidding documents and 10 submitted bids.

Atria’s existing fibre range includes Hamilton, Ont., the Region of Waterloo, most of Wellington County and the Guelph area, and Simcoe County. Last October, Atria bought PowerStream’s fibre optic assets in York Region. The Ottawa buy isn’t redrawing Atria’s map of central Ontario or a changing focus, McCartney said.

“We’ve always done services throughout the province, and in doing so, as you can imagine in telecom, we’ve partnered with people who had assets in the areas where we didn’t,” McCartney said.

“Atria historically has had a lot of customers where we provide transparent LAN for companies with multiple sites. That’s quite a bit of our business. So whenever we would do that in Ottawa, for instance, we go to Telecom Ottawa. And we would work with various other carriers.

“All we’ve really done is, more of those assets have fallen under our control.”

He laughed off speculation by SeaBoard Group that a deal for “some key beachfront property near the CN Tower (in Toronto)” was in the works, and was mum about prospects for a purchase of Toronto Hydro’s telecom assets. Toronto Hydro Telecom has been tentatively on the block since January. Some published estimates put its sale value at $135 million.

Iain Grant, principal of SeaBoard Group, says the multiple paid for Telecom Ottawa – about 3.9 times annual revenue – makes THT worth closer to $200 million. And he says incorporating Toronto Hydro’s fibre into Atria’s network makes more sense than Ottawa’s.

“The value of Toronto Hydro Telecom is much more than simply what the financial valuations suggest,” Grant said. “It’s such a strategic fit as part of the jigsaw puzzle. Ottawa is a wonderful place to have a network in, but tying it together with Guelph doesn’t necessarily make it that much more attractive.”

“The commonality between Ottawa, Guelph, Cambridge and Barrie isn’t nearly as strategic as the fit of Toronto, with all of its surrounding hinterland. If you’re Atria, Toronto is the jewel in the crown.

“But so, too, if you’re someone else.”

Grant wonders if the City of Toronto has thought through the sale of THT thoroughly. It’s doing a good job of offering relatively low-cost services in the city, he said, especially the “MUSH” sector – municipalities, universities, schools and hospitals.

“THT obviously was getting up the nose of a number of companies who also call Toronto home,” Grant said. “So much so, I think the mayor found the grief wasn’t worth the benefits of owning THT. But THT was doing some interesting things and was putting Toronto on the map in a number of ways. If you roll back the tape, the (Toronto mayor) David Miller of two years ago was much more enthusiastic. Fast forward to today, David Miller is not as enthusiastic.”

Hydro Ottawa’s Benson insisted that outside pressure didn’t pay a role in the City’s sale of Telecom Ottawa.

“I don’t think that was a factor at all in the Board’s decision,” Benson said. “Essentially, it’s about focusing on Hydro Ottawa’s core energy businesses.” These are low-risk investments with stable long-term returns, important for a company owned by the City. “Telecom Ottawa is a solid business, a profitable business, but it does carry a higher risk profile than our other investments.”

Telecom Ottawa’s fibre roots go back to part of the electrical distribution business, which began laying fibre as early as 1978, Benson said. That 250 km of fibre has been built out to about 1,250 km.

The company was created as a result of the Electricity Act of 1998, which forced electrical distributors to spin off their non-distribution assets.

Benson called the 3.9-times multiple “a strong value. It represents a good outcome to the process for us…I wouldn’t say it’s surprising, but it’s a strong outcome to the process.”

And there is a lot of value to the Ottawa network in an Ottawa context, Grant said.

“Within Ottawa, it’s a very attractive property,” Grant said. “It does connect most of Canada’s central government buildings. This is a single client that has enormous need for data communications capacity. You become therefore a partner with anyone who wants to serve government.”

Atria is owned by Birch Hill Equity Partners Management Inc., an equity company established by former principals of TD Capital. “I don’t see Atria as a long term operator of telecommunications properties,” Grant said. “I see them assembling a group of assets with the possibility that the whole is greater than the parts.”

The management has “a long pedigree of looking at communications investments in Canada and seeing value where others don’t,” Grant said. “Birch Hill is in the business of making money, not moving electrons around.”

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Dave Webb
Dave Webb
Dave Webb is a freelance editor and writer. A veteran journalist of more than 20 years' experience (15 of them in technology), he has held senior editorial positions with a number of technology publications. He was honoured with an Andersen Consulting Award for Excellence in Business Journalism in 2000, and several Canadian Online Publishing Awards as part of the ComputerWorld Canada team.

Featured Articles

ADaPT connects employers with highly skilled young workers

Help wanted. That’s what many tech companies across Canada are saying, and research shows...

Unlocking Transformation: IoT and Generative AI Powered by Cloud

Amidst economic fluctuations and disruptive forces, Canadian businesses are steering through uncharted waters. To...

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now