Ottawa Nixes MTS-Allstream Deal Over National Security Concerns

Last month MTS publicly stated it planned to skip the 700MHz wireless spectrum auction to focus on local networks. Another reason was the fact it had a pending $520 million sale of its nationwide AllStream fiber optic network to Accelero Capital Holdings, which belongs to Egyptian billionaire Naguib Sawiris, the original backer of WIND Mobile.

The sale was subject to approval by Industry Canada, which has announced it has not approved the deal over national security concerns. Industry Minister James Moore issued the following statement:

“The Government of Canada has concluded its review of Accelero Capital Holdings’ proposed acquisition of the Allstream division of Manitoba Telecom Services Inc. (MTS) under the national security provisions of the Investment Canada Act. The result of this review is that the transaction will not proceed.

“MTS Allstream operates a national fibre optic network that provides critical telecommunications services to businesses and governments, including the Government of Canada.”

MTS has responded to the rejected sale and noted it was “extremely surprised and disappointed by this decision.”

“We pursued this transaction, with Accelero as our partner, in direct response to the Federal Government’s stated policy objectives of increasing foreign investment and driving greater competition in Canada’s telecommunications sector, so this result is very difficult to understand or accept,” said MTS Allstream CEO, Pierre Blouin.

The sale of a nationwide fibre optic network to a foreign owned company doesn’t seem to be something Ottawa wants to approve and it’s not the first time Industry Canada has stepped in over national security concerns.

Industry Canada previously delayed a plan for Dutch company VimpelCom to take majority control of WIND Mobile over similar national security concerns, based on the fact the latter’s network is built using China-based Huawei’s infrastructure, which is alleged to have ties to China’s cyberwarfar unit in the People’s Liberation Army.