Is Cogeco’s Jan Peeter’s on the prowl for Atria Networks?

Cogeco Cable Inc.'s acquisition of Toronto Hydro Telecom (THT) for $200 million has analysts speculating that the company is thinking much bigger than Canada's largest city. It could also signal something of a comeback for Cogeco Inc. and Cogeco Cable chair Jan Peeters, who got badly burned in the CallNet takeover of Fonorola in 1998. THT's sale wasn't unexpected. What surprised analysts, however, was who bought it. Most bets were on Atria Networks LP, which has been expanding in southern Ontario by buying up hydro telcos. The purchase gives Cogeco a healthy compliment of enterprise customers, and puts it head-to-head with Bell Canada Enterprises in Canada's most lucrative market. "Cogeco is the spoiler," says Lawrence Surtees, VP and principal analyst, communications research, at IDC Canada Ltd. "I would have put my money on Atria Networks. It would have been a natural for them. Atria has been playing out an ambition as a grand consolidator of the local hydro telecoms, and by not getting Toronto they are missing a once in a lifetime opportunity." Most recently, Atria bought Telecom Ottawa Holding Inc.'s subsidiaries from Hydro Ottawa Holding Inc. (February 2008), FibreWired Hamilton from Hamilton Utilities Corporation (January 2008) and PowerStream Inc., the electricity distribution company jointly owned by the City of Vaughan and the Town of Markham (October 2007). Surtees points out that this is the second deal of this sort completed by Cogeco: they also picked up MaXess Networx, the telecom arm of Windsor's energy company, in March of this year. "This leads me to wonder if the next step is for Cogeco to make a run on Atria," he says. "If you look at the network route maps for Cogeco, over the past few years they've been beefing up and connecting optical networks throughout Ontario and Quebec. I don't think Jan Peeters will stop here. He's been waiting a long time, and it would be a no-brainer to go after Atria, or even Blink Communications," says Surtees, referring to the facilities-based subsidiary of Oakville Hydro Inc. Other industry analysts also see this as a win-win for both the parent company, Toronto Hydro Corporation, which is owned by the City of Toronto, and Cogeco. These include Iain Grant and Amit Kaminer of the Seaboard Group. "We are quite excited by the marriage," said Grant via email. "It's a good match for both companies. Cogeco will give THT access to capital and creative ownership; THT will give Cogeco access to Toronto." In a telephone interview Kaminer said this purchase launches Cogeco past the likes of Rogers Communications in Toronto's enterprise space. It also puts Cogeco up against Bell. "With the THT purchase Cogeco is now at the forefront of the Toronto market," says Kaminer, "right in the financial district. Most enterprises are using Bell, and holding THT for redundancy. Cogeco can continue THT's branding of itself as a ‘Bell free zone'." Both THT and Cogeco emphasize the impressive technology that was on the table. THT owns and operates both 10 Gigabit MPLS and OC-48 SONET backbone networks, and is now on the second phase of rolling-out of its four phase data centre. "It's a great company with a lot of opportunity," says Marie Carrier, director of corporate communications for Cogeco. "We get the data centre, state of the art technology, and good people. The money was put in the right place." Mark Tauschek, a senior research analyst at Info-Tech Research Group in London, ON, is also generally positive about the deal. "I was a little bit surprised at Cogeco making that buy," he says. "Not shocked, but I didn't expect it. It's a good buy for Cogeco. They get into the enterprise market in Toronto with a ton of fibre, the data centre, some really solid infrastructure." Jan Peeters Fonorola "sequel"? For his part, IDC's Surtees has connected some dots that go back over a decade in the world of telecom in Canada. "Back in 1996 the resale market for long distance got very competitive," says Surtees. "A company called Fonorola Inc. started as a reseller, and began to expand and build its own network. Who were they? And where were they getting their money? They put in a DMS-500 switch and they had it on the 8th and 9th floor of the Royal Bank Tower in Toronto, overlooking the harbour." Turns out Fonorola had some solid backing from European financiers, including Lord Jacob Rothschild of Europe's famous banking family, largely thanks to the work of Fonorola's vice-chair and president, Jan Peeters. However, Fonorola became embroiled in a hostile, $1.6-billion takeover bid by CallNet Enterprises Inc. When the dust settled the bid had risen to $1.8 billion, the takeover happened, and CallNet terminated the top executives of Fonorola, including Peeters. By that time the customer base had evaporated. "Jan Peeters is an amazing venture capitalist," says Surtees, "and he's the brains behind Cogeco's build out. This is his sequel."

Is Cogeco’s Jan Peeter’s on the prowl for Atria Networks?

News | 06/30/2008 3:17 pm EDT

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