Call-Net closes deal with Bell Canada on 360networks’ eastern Canadian operations

Call-Net Enterprises Inc. and Bell Canada have closed the first part of their asset and network facilities transfer initiative regarding the former 360networks Corp. eastern Canadian operations. Bell Canada finalized the acquisition of 360networks’ Canadian operations on November 22, subsequently selling 360network’s eastern operations to Call-Net the same day. Bill Linton, president and CEO of Call-Net explains that there are a number of positives to take from the deal, including gaining a larger customer base and higher annual revenue. "It certainly gives us a boost in terms of numbers of customers, which is about 4,000 and revenue of about $60 million a year," he tells Network Letter. Linton adds though, that the deal is not just about customers and revenue, it’s type of revenue and customers that are key to the agreement. "It’s also a boost in that it’s the type of revenue that we are striving to get more of because it’s local and data as opposed to 1+ and toll free long-distance revenue," he explains. "That’s pretty positive and it’s part of a transaction that’s going to be a greater thing in the future. Once we have those assets we’re going to be able to not only carry the traffic ourselves, but be able to sell new customers on this network. It makes us a bigger company…and one of the things we like about it is there’s not a great overlap in the customer base and there’s certainly not an overlap in the services. So we think there is some real potential to sell these customers some of the products and services that we have," he says. Under terms of the agreement, originally announced in May 2004 (NL, June 8/04), Call-Net has an option to purchase network access facilities, dubbed CLEC assets in a November 22 news release, within two years. Call-Net has four months to determine which CLEC assets it wishes to acquire in two years. The 24-month time frame coincides with the ending of a two-year service agreement under which Bell Canada will provide to Call-Net technical and operational services. A key part of the deal between the two companies is the 1,000 office buildings to which Call-Net will get access through the CLEC assets acquisition. In a conference call announcing the agreement earlier this year, Linton said the asset acquisition would provide the company with significant cost savings in terms of network leasing. "That glass isn’t going to go away. You can put different electronics on either end of it, but the real key asset here is owning your own access and that’s going to be valuable in two years – and in 10 years," he said during the conference call. Reiterating his previous comments, Linton tells NL, "In two years time, when we own the assets, this cost of leasing the network from Bell goes away." The cost of acquiring 360networks’ eastern Canadian assets increased slightly from the time the agreement was announced. In May, it was estimated that Call-Net would have to pay Bell Canada approximately $12.5 million in installments over a two-year period. The purchase price, as announced in the November 22 news release, jumped to $15 million over a two-year period.

Call-Net closes deal with Bell Canada on 360networks’ eastern Canadian operations

News | November 25, 2004

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