GT Group Telecom announced last month that it will purchase Shaw Communications Inc.’s telecommunications unit for approximately $760 million. GT will pay $360 million in cash, as well as 28.5 per cent share of the company to Shaw.
Under the agreement, which is expected to close on or before March 31, 2000, Group Telecom will combine its business with that of Shaw FiberLink, a competitive access provider that offers services to enterprise businesses, Canadian carriers and the government. FiberLink is a subsidiary of Shaw.
Group telecom will now have access to over 12 operating service areas across seven provinces.
According to Steven Koles, vice-president of marketing at GT, the agreement “allows us to increase what I would call an addressable market, in terms of serving the different areas that we can now reach using our own — when I say ‘our’ I mean including the Shaw FiberLink fibre optic network — our own fibre optic network.”
With this growth, Koles said, an increase in the number of customers the company can address will also occur.
Customers now have a choice, according to Koles. “What we call ourselves is a next generation telecom service provider alternative to those small and medium businesses out in the Canadian marketplace that currently have to fragment their dollar as it relates to choosing a separate Internet provider, a separate dial tone provider, a separate long distance provider, probably a separate e-commerce provider, and so on,” he said.
Shaw will continue to focus on its core business, said Peter Bissonnette, the president of Shaw Cablesystems. There will still be opportunities to build things in unison, he said, as Shaw still has that 28.5 per cent interest in Group Telecom.
“Jim (Shaw, president of Shaw Communications) is on the board of Group Telecom,” he explained. “And of course, because Group Telecom will have an IRU (indefeasible rights of use) over our facilities, we will continue to do all the maintenance and the construction, and provide engineering support for that network.”
As part of the agreement between the two firms, there will also be a joint construction of 100,000 kilometres of fibre to be completed during the next three years. The companies are evaluating various options right now, Bissonnette said.
“We’re looking at roots from Victoria essentially out to the Atlantic region,” he explained. “Essentially, we want to interconnect all of our systems, and that backbone would provide us with tremendous capability with respect to our Internet services.”
GT would benefit from the inter-city connections because they would have an opportunity to size that fibre to meet their needs as well, Bissonnette said.
This is a great deal for both parties according to Jordan Worth, an analyst with IDC Canada, as he said each company gains a strong partner. And while he expects to see more acquisitions by GT, Worth said the market will see some of the same, especially considering the number of CLECs in the country.
But this particular deal is “first up in consolidation,” Worth said, “and there will undoubtedly be more. But it’s still early. The CLECs really are just getting out there now winning customers.”
Smaller cities may be the next target for the CLECs, according to Worth, where there is opportunity but less competition.
“What you may end up seeing is them changing their focus from tier one cities — like Toronto, Montreal, Ottawa, Vancouver — to tier two cities, and even tier three cities, smaller cities like Barrie, Kitchener, Waterloo, London, Victoria.”
GT will have more than 7,828 route kilometres of fibre and approximately 1,045 on-net buildings on the network.