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Rogers enters Halton's telecom market with Blink purchase By Tim Foran OAKVILLE BEAVER STAFF 7 · Wednesday, February 3, 2010 OAKVILLE BEAVER · www.oakvillebeaver.com Oakville Hydro announced Friday it has sold its telecom subsidiary, Blink Communications, to Rogers Communications for an undisclosed sum in a deal one industry analyst said could be Rogers' attempt to gain entry into the Cogeco-dominated residential cable, voice and Internet market in Halton region. Blink provides voice, video and data services to businesses, including Halton's Catholic school board and its regional police service, through its 1,300 kilometre fibre optic network in Oakville, Milton, and Burlington, an area with a population of about 420,000, as well as other parts of the GTA. "Once you've got fibre, it's nothing to put WiMax at the end of that," said telecom analyst Eamon Hoey, senior partner of Hoey Associates. The WiMax wireless spectrum is a cheap way to connect fibre optic infrastructure to homes to offer television, telephone and Internet services, Hoey explained. Hoey said Rogers had previously announced it was no longer going to be active in the enterprise networking market. He said the purchase of Blink therefore appears to be an attempt to buy the company before Cogeco acquired it. Cogeco has been active in recent years buying up telecom companies owned by utility companies. It bought Burlington Hydro's FibreWired Burlington, and its 400 km fibre optic network, for $12.6 million on June 30, 2008 and Toronto Hydro's telecom subsidiary a month later for $200 million. Rogers did not return calls for comment as of press time. The sale of Blink means all four of the hydro companies owned by Halton's local municipalities have now exited the telecom business, a trend seen province-wide, said Hoey. Blink, a subsidiary of Oakville Hydro, whose sole shareholder is the Town of Oakville, had been going against that flow in recent years. In 2006, the company acquired Mississauga's Enersource Telecom. Two years later, it bought Milton Hydro's telecom subsidiary. It also started to lay fibre in Etobicoke, giving it a major network in the western GTA. It expanded its reach into the area east of Toronto last October when it bought the telecom assets of Veridian Energy located in Ajax, Pickering, Bowmanville, Port Hope and Belleville. That was as far as Blink could go with the resources it had, Oakville Hydro Board Chair Gary Burkett stated in a press release Friday. Burkett said the company has decided to focus on its two remaining subsidiaries, Oakville Hydro Electricity Distribution, which provides electricity to Oakville's residents and businesses, and Oakville Hydro Energy Services, which generates renewable energy, provides electric meters and rents energy efficient hot water heaters. The Town of Oakville's budget chief, Regional Councillor Tom Adams, said the municipal council saw those two subsidiaries as worthy of remaining in the public realm, similar to the road network. Adams said council had discussed in camera over the last year selling off Blink and a vote to that effect was eventually taken. Asked if opinion on council was unanimous, Adams said, "I think it was." CIBC World Markets served as financial advisors and Blake, Cassels & Graydon LLP were legal advisors to Oakville Hydro for the sale of Blink, the company stated. Oakville Hydro will report to Town Council "on the fiscal and after-tax results from the sale in the second quarter of this year." Adams said council hasn't taken a position on how the municipality will use profits from the sale. However, he suggested the primary aim would be to ensure the steady flow of income to the municipality from the Oakville Hydro holding company, currently about $9 million a year, continues, which might involve putting some of the profit into an interest-generating fund. Other possibilities could include paying off debt or using the money for capital funding, he said. Sales of utility telecoms have generally provided a significant boost to municipal coffers. The City of Burlington received an extra $8 million dividend from Burlington Hydro in 2008 due to the sale of FibreWire, almost $6 million of which was directed to its Performing Arts Centre. Toronto Hydro reported an extra $86 million in net income on its 2008 financial statement, mostly due to the $200 million sale of its telecom subsidiary. The City had planned to use $75 million to ease a backlog in needed repairs to its public housing stock, Mayor David Miller had said at the time of the sale. Last spring, the Town of Halton Hills authorized the sale of Halton Hills Fibre Optics Inc. and Hummingbird Wireless to Atria Networks for $4.75 million. The Town expected its holding company, Halton Hills Community Energy Corporation, to realize a profit of $1.4 million after paying off outstanding debts, transaction closing costs and taxes. Oakville Hydro at a glance · Oakville Hydro is a holding company, owned by the Town of Oakville. · The Town's investment in Oakville Hydro increased by $3 million in 2008 to $165.7 million, according to its 2008 annual report. · The municipality received an estimated $9 million in revenues from Oakville Hydro in 2009, about a half million more than the previous year. Town's revenue comes from various sources -- dividend from subsidiary Oakville Hydro Electricity Distribution, rental of Oakville Hydro headquarters, and interest on loans to the holding company. 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