Thursday, November 27, 2008

Bell Canada's Privatization Faces Scrutiny

The leveraged buyout deal under which BCE (Bell Canada) was to become a privately held company is facing greater financial scrutiny.


KPMG has informed BCE that, based on current market conditions, its analysis to date and the amount of indebtedness
involved in the LBO financing, it does not expect to be in a position to deliver on the scheduled effective date of BCE's privatization, December 11,
2008, an opinion that BCE would meet the solvency tests as defined in the definitive agreement, as amended. The receipt at the effective time of a
positive solvency opinion is a condition to the closing of the transaction. At the same time, KPMG indicated that BCE would meet all solvency tests
under its current capital structure.


"BCE today enjoys solid investment grade credit ratings, has $2.8 billion of cash on hand, a low level of mid-term debt maturities, and continues to
deliver solid operating results," said George Cope, President and CEO of BCE and Bell.


"We are disappointed with KPMG's preliminary view of post-transaction solvency, which is based on numerous assumptions and methodologies that we are currently reviewing. The company disagrees that the addition of the LBO debt would result in BCE not meeting the technical solvency definition," said Siim Vanaselja, BCE's Chief Financial Officer.


BCE said it continues to work with KPMG and the Purchaser to seek to satisfy all closing conditions. Should KPMG be unable to deliver a favourable
opinion on December 11, 2008, however, the transaction is unlikely to proceed.http://www.bce.caIn July 2008, BCE announced a final agreement with a company formed by an investor group led by Teachers' Private Capital, the private investment arm of the Ontario Teachers' Pension Plan, Providence Equity Partners, Madison Dearborn Partners, and Merrill Lynch Global Private Equity. Key terms include:

  • The purchase price will remain $42.75 per common share;


  • The Purchaser and the Lenders have delivered fully negotiated and executed credit documents for the purpose of funding the transaction, including an executed credit agreement and other key financing documents;

  • The reverse break fee payable by the Purchaser in the circumstances contemplated by the definitive agreement has been increased to $1.2 billion;

  • Closing will occur on or before December 11, 2008; and

  • Prior to closing, the company will not pay dividends on its common shares but will continue to pay dividends on its preferred shares.

Ericsson to Manage MBNL's Shared Network in the UK

Mobile Broadband Network Limited (MBNL), the 50:50 joint venture formed by 3UK and T-Mobile UK to manage the integration of both operators' 3G radio access networks (RAN), has awarded Ericsson a four-year managed services contract for the operation and maintenance of the consolidated network.



Under the deal, Ericsson has responsibility for the operation and performance management of both parent companies' 3G networks and T-Mobile's 2G RAN infrastructure. Around 80 employees from T-Mobile have been transferred to Ericsson, further strengthening its existing UK managed services capability. In the UK, Ericsson holds separate managed services contracts with T-Mobile and 3. T-Mobile and 3 are both global Ericsson customers. Financial terms were not disclosed.


T-Mobile and 3 formed their infrastructure sharing agreement in January 2008 with the aim of creating the UK's most extensive 3G network by 2010.


The companies said tis four-year contract will enable MBNL to control operational expenses and deliver high service levels at a time when the 3G network consolidation is moving into the mass deployment phase. The first integrated cell site was commissioned in early February 2008. Since then MBNL has concluded a pilot in the Leeds and Bradford area which successfully validated the network sharing technology and is now engaged in consolidating the radio access networks across the UK.http://www.ericsson.com
  • In October, BT announced a five-year managed network solutions agreement with T-Mobile and 3 UK, through their joint venture company, Mobile Broadband Network Ltd (MBNL). Specifically, BT will provide Ethernet backhaul connecting 7,500 base station sites on their consolidated 3G infrastructure. The network services contract supersedes the original contracts that BT had in place with both T-Mobile and 3 UK. BT's next-generation Ethernet service is currently being rolled out across the UK. The service will deliver improved access and backhaul service delivery to MBNL.


  • In August 2008, Nokia Siemens Networks announced that it had been selected as technology partner for Mobile Broadband Network Ltd. (MBNL), the network collaboration joint-venture between T-Mobile UK and 3 UK. The companies anticipate creating the UK's most extensive 3G network providing near complete population coverage by the end of 2009. Financial terms were not disclosed. Under the contract, Nokia Siemens Networks will supervise the creation and operation of the joint network on behalf of both companies. The first integrated cell site was commissioned in early February. Although masts and the 3G access networks are being combined, each company's core network and T-Mobile's 2G network will not be shared. Both parties will retain responsibility for the delivery of services to their respective customers and use their own frequency spectrum. Nokia Siemens Networks said its radio access solution will replace most of the two operators' communications stations across the UK and equipment at the remaining sites is being upgraded and reconfigured for higher quality and capacity.

    Clearwire Deal Clears -- $3.2 Billion Investment Completed

    Clearwire and Sprint Nextel completed the financial transaction combining their next-generation wireless Internet businesses. The new company retains the name Clearwire and remains headquartered in Kirkland, Washington.


    Sprint contributed all of its 2.5 GHz spectrum and its WiMAX-related assets, including its XOHM business, to Clearwire.


    In addition, Clearwire has received a $3.2 billion cash investment from Comcast, Intel, Time Warner Cable, Google and Bright House Networks. The transaction with Sprint and the new cash investment were completed on the terms originally announced on May 7, 2008.http://www.clearwire.com/Under the Clearwire-Sprint deal announced in May, Sprint will own the largest stake in the new company with approximately 51 percent equity. The existing Clearwire shareholders will own approximately 27 percent and new investors, including Intel, Google, Comcast, Time Warner Cable and Bright House Networks, will contribute $3.2 billion into the new company to acquire a 22 percent stake.

    Some highlights of the deal:

    • The new Clearwire is targeting a network deployment that will cover between 120 million and 140 million people in the U.S. by the end of 2010.


    • Sprint will contribute all of its 2.5 GHz spectrum and its WiMAX-related assets into a subsidiary of the new company. The implied equity valuation of Sprint's contribution is approximately $7.4 billion. In addition to spectrum, Sprint will contribute to the new Clearwire certain hardware, software and all of its WiMAX-based trademarks and other WiMAX-related intellectual property.


    • The new Clearwire will leverage Sprint's existing infrastructure, reducing the cost of building out the mobile WiMAX network nationwide. The new Clearwire expects to utilize Sprint's towers, fiber network and IT support at favorable bulk rates. Sprint also will realize cost savings for its core business by sharing certain costs of towers and other infrastructure.


    • Intel will work with manufacturers to embed WiMAX chips into Intel Centrino 2 processor technology-based laptops and other Intel-based mobile Internet devices, and will market the new company's service in association with Intel's performance notebook PC brand.


    • Google will partner with the new Clearwire in the development of Internet services, advertising services and applications for mobile WiMAX devices. In addition, Google will be the search provider and a preferred provider of other applications for the new Clearwire's retail product.


    • Google will partner with the new Clearwire on an open Internet business protocol for mobile broadband devices. The new Clearwire will support Google's Android operating system software in its future voice and data devices that it provides to its retail customers.


    • Sprint, Comcast, Time Warner Cable, and Bright House Networks will enter into wholesale agreements with the new Clearwire, becoming 4G providers of new Clearwire's mobile WiMAX service.


    • Comcast, Time Warner Cable, and Bright House Networks and, after completion of the transactions, the new Clearwire, will enter into 3G wholesale agreements with Sprint, becoming bundled providers of Sprint's wireless voice and data services, expanding the reach of Sprint's network to more customers, while providing the cable companies a simpler, more effective vehicle to bundle wireless services.


    • Sprint and Google have also entered into an agreement related to Sprint's mobile services, whereby Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint. Sprint will also preload several Google services - including Google Maps for mobile, Gmail and YouTube - on select mobile phones and provide easier access to other Google services.


    • Google and Intel have options to enter into 3G and 4G wholesale agreements with Clearwire and Sprint respectively and have no current plans to do so.

    See also