AT&T Canada Corp. sold two of its subsidiary companies, Contour Telecom Inc. and Argos Telecom Inc. to YAK Communications (Canada) Inc. earlier this week.
Contour Telecom, bought by AT&T in 1999, employs less than 100 people and provides managed telecom and consulting services. Argos Telecom was purchased in 2000 and offers bundled telco services which include local and long-distance services across Canada. It currently staffs approximately 75 employees with offices in Toronto and Montreal. Both companies primarily target small- and medium-sized businesses as well as the residential market.
YAK is a wholly owned subsidiary of YAK Communications (USA) Inc., offering international long-distance services to businesses and consumers. YAK has acquired Contour and Argos as complete operating units. Financials of the deal were not released but AT&T will receive an undisclosed amount of cash for the transaction, which is expected to close on July 2, 2003.
After nearly four months of negotiating the deal, YAK said it is not rushing to bring its new companies into the fold anytime soon.
“We’re really not looking to consolidate the companies at this point. We’re looking to diversify our customer base and product base,”said Charles Zwebner, president and CEO at YAK in Toronto. He added that layoffs weren’t planned at either company and that it will look at consolidating operations between it and the two new additions in the future.
A spokesperson for AT&T said the move to sell the two companies is representative of the company’s desire to move out of the small business market.
“It’s part of the same string of actions we’ve taken to focus the business more on enterprise customers with complex needs, which sits with the larger customers,” said Dean Prevost, senior vice-president, strategy and corporate development for Toronto-based AT&T.
In 1999, AT&T company sold its residential long-distance and Internet customer base to Primus Canada Inc., a unit of McLean, Va.- based Primus Telecommunications Group Inc. for $57 million. Its target area is now becoming clear, said one industry analyst.
“We know that AT&T wants business customers and it really isn’t positioned to focus on small and midsized businesses…it wants the big customers to get into the big game,” said Brownlee Thomas, research director at Forrester Research Inc. in Montreal.
The decision by the telco to unload two former assets is coincides with decisions from more of the incumbent and local carriers in the industry to “get out of business ventures that are not providing them with revenue quickly,” Thomas said.
As for YAK, she noted the acquisitions could bolster its customer base, “depending on what it paid” for the two companies.