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Manitoba Telecom Services Inc., including its two primary operating subsidiaries, MTS and Allstream Inc., announced it has signed a binding agreement to sell Allstream to Zayo Group Holdings Inc., a leading provider of communication infrastructure in an all cash transaction for $465 million.

“This transaction is the outcome of a comprehensive process which left no stone unturned,” said Jay Forbes, President and CEO. “We engaged with a variety of potential strategic and financial buyers in a very orderly process. We believe this transaction maximizes the value of a stabilized and renewed Allstream, is in the best interests of the Company, and positions both MTS and Allstream for long term success in a competitive telecom marketplace.”

Zayo is primarily interested in adding Allstream’s substantial fiber and colocation assets to Zayo’s core network Communications Infrastructure business. Allstream has over 9,000 route kilometers of metro fiber network concentrated in Canada’s top five metropolitan markets, (Toronto, Montreal, Vancouver, Ottawa, and Calgary) that connect to approximately 3,300 on-net buildings. In addition, Allstream has an approximate 20,000 route kilometer long-haul fiber network connecting all major Canadian markets and 10 U.S. network access points. In addition, Allstream operates colocation space in Toronto, Montreal, and Vancouver.

“Within today’s Allstream is a robust collection of fiber networks, which are enormously valuable to both Allstream and Zayo customers,” explained Dan Caruso, chairman and CEO of Zayo. “We will unleash the full potential of these assets by combining them with Zayo’s network and focus on providing high-quality and low-cost bandwidth to help fuel the growth of Canada’s economy.”

The other half of Allstream’s business will be organized into two additional segments: Voice and Universal Communications (approximately one-third of Allstream’s revenue), and Small Business (primarily enterprise voice). Are these being prepared for sale? They seem not to fit Zayo’s strategic direction.

This is the second time MTS has attempted to sell Allstream. Egypt’s Accelero Capital agreed to buy the unit for CAN$520 million in 2013. However, that deal failed to receive the necessary regulatory approval due to national security concerns. Rumours are that concerns were raised by the US Government. This time, things should be different. MTS states that “Throughout the sale process the Company held discussions with relevant regulatory stakeholders which we believe will help facilitate orderly approvals, including national security approval.”

To see the details of Allstream announcement, see Allstream

Details of Zayo’s announcement at Zayo

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