Naguib Sawiris1--Sarah Dea/The Globe and Mail
Speculation is growing that Manitoba Telecom Services Inc. may be nearing a sale of its Allstream division.
A major bank has sent a memo to staff citing a story that ran in a U.S. publication called Merger Market that suggests Egyptian billionaire Naguib Sawiris is emerging as a key bidder for Allstream, which has been the subject of a strategic review since last fall.
Mr. Sawiris is the former head of Cairo-based Orascom Telecom Holding SAE and is also the original financial backer of Canadian wireless company Wind Mobile.
Sources have said his investment firm Accelero Capital is partnering with AAL Corp., a holding company controlled by Wind chief executive officer Anthony Lacavera, to purchase Wind from its Amsterdam-based parent company VimpelCom Ltd. (VimpelCom effectively controls Wind through its majority stake in Orascom, but has recently launched a buyout of Mr. Lacavera in order to formalize its ownership.)
Now there is increasing chatter on Bay Street that Mr. Sawiris could also be interested in buying Allstream.
According to the internal memo sent to staff at Toronto-Dominion Bank, the Merger Market story suggests Allstream could be worth about $300-million (U.S.).
"The process is active and ongoing and we are focused on getting to the right outcome for the company and our shareholders. We won't be providing any updates until it has been concluded," Manitoba Telecom Services said in a statement Tuesday.
This is not the first time that Mr. Sawiris has been floated as a potential bidder for Allstream.
Wind Mobile held discussions with MTS for much of 2011, but those talks eventually broke down, sources say.
Citing that previous "interest," Jeff Fan, an analyst with Scotia Capital Inc., has also suggested that Mr. Sawiris could be taking a second look.
"With Allstream on the block, we would not be surprised to see Wind make a play for the asset," Mr. Fan wrote in a recent note to clients.
"We believe their rationale is that Allstream has metro fibre that can be used for wireless backhaul. Allstream currently supplies Wind for some backhaul services, but Allstream's reach is still inferior to the incumbents' ILEC [Incumbent Local Exchange Carrier] reach. Allstream could also be a channel into the enterprise segment for wireless."
Mr. Fan said that adding Allstream could cost roughly "$300-million to $400-million," suggesting a total outlay of about $1-billion to purchase Wind, merge it with rival wireless startup Mobilicity and Allstream before a government auction of wireless spectrum begins in November.
Earlier this year, MTS chief executive officer Pierre Blouin moved to quell criticism that Allstream's strategic review had lost steam.
During an interview in mid-February, he gave assurances that the review was "ongoing," adding there were a number of "live options" that were being assessed.
"In our opinion, it is not taking too long," Mr. Blouin said at the time. "If you go back to our announcement in September, we said that review is going to take up to a year.
MTS acquired Allstream, formerly known as AT&T Canada, in a deal worth $1.7-billion in 2004.