Unique Broadband takes minority stake in Look; seeks out future agreements

Unique Broadband Systems Inc., a maker of OFDM-based wireless modems, is investing $5 million in struggling wireless cable and high-speed Internet provider Look Communications Inc. as part of its strategy to gain better access to recurring revenue. In return for the significant investment, the two companies have signed a $2.4-million equipment supply agreement. The length of the supply deal won’t be known until the investment agreement is completed, which is expected within the next month. Peter Block, a spokesperson for UBS, says this is a win-win for both companies. "The intent and the hope in this is that combined the two companies can better address this under-served market than on their own … the putting together of the service provider and the box in effect," he tells Report on Wireless. UBS of Concord ON will chip in nearly $1.4 million through a private placement, which will give it a nine per cent ownership stake in Look. An additional $3.6 million will also be added to Look’s coffers through the purchase of a five-year debenture, which, if converted after the first year, could give UBS a 23 per cent equity stake in the wireless cableco. Partnering with communications service providers is a key part of UBS’ recurring revenue stream strategy. The company experienced a significant reduction in revenue following the ending of a major contract with Hughes Network Systems last year. 2001 third-quarter financials demonstrated a significant decline in revenue to $5.9 million from $27.8 million recorded in the same quarter in the previous year (RoW, Aug. 7/01). This is only the first agreement where UBS will be partnering with service providers, according to the company. Block says the company has been working hard to secure similar agreements since a new board was appointed earlier this year. UBS is now headed up by Gerald McGoey, who is also chair of the board. "Rather than leaping or lunging from contract to contract, the intent of McGoey et al. was to let’s build in some kind of annuity or some kind of recurring revenue stream to supplement technology sales revenue," explains Block, saying that further agreements are on the horizon. But as McGoey tells him, "there’s more I can’t say than I can say." UBS went through a long and protracted battle between two groups of shareholders, which had each proposed its own slate of directors. The group led by McGoey was ultimately victorious (RoW, April 3/02 and Feb 5/02, and RoW Update, Oct. 22/01). Non-UBS shareholders were even trying to capitalize on the struggle. Plaintree Systems Inc. proposed electing its own slate of directors. During that period, the company also undertook a major restructuring to shed expenses and redundant facilities and divest of non-core activities. Look to expand high-speed Internet offering The injection of $5 million is certainly welcome news to Look, which emerged from creditor protection under the Companies’ Creditors Arrangement Act (CCAA) late last year (RoW Update, Dec. 17/01). "How many people do you think thought that Look would get new money so soon after coming out of CCAA?" Look spokesperson Alex Radmanovich asks rhetorically. "Obviously, it’s very helpful, very beneficial and the timing of it couldn’t be better."The Milton ON-based firm will use the money to expand the coverage and quality of service of its wireless high-speed Internet offering. The cash infusion allows the company to expand "the service to more pockets, to expand the coverage and marketing is also very important," Radmanovich notes. The equipment provided by UBS as part of the supply agreement will also help Look expand capacity on its network. The company will now have the capacity to serve more high-speed Internet customers and wireless cable subscribers. Radmanovich declined, however, to comment on any projections of future uptake of the company’s services as a result of the financing. He says that other companies in the same market segments are also refusing to provide guidance going forward. Since emerging from CCAA protection, the company has refocused its energies on the small- and medium-sized enterprise (SME) segment in under-served areas of Ontario and Quebec. Going after industrial parks and commercial districts are two examples of under-served areas that Look will certainly be targeting, according to Radmanovich. It doesn’t appear, however, that the company is going to forge into the countryside to try and hook up SMEs in the smaller regions of the country’s two most populous provinces – at least not at this time. Radmanovich explains that high-speed Internet is already operating in Toronto and Montreal, and Ottawa is a likely choice as well. "What this new money and equipment will do is, (Look) will be able to serve more customers," he says. "That’s the important factor."

Unique Broadband takes minority stake in Look; seeks out future agreements

News | 08/19/2002 4:00 am EDT

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