MTS sells Allstream to Zayo for $348 million

Zayo Group
MTS has sold Allstream, a provider of bandwidth and telecom services to business and public sector customers in Canada, to Zayo Group Holdings for CAD $465 million or $348 million.

Allstream has approximately CAD $600 million revenue and Adjusted EBITDA (excluding restructuring charges) of approximately CAD $100 million.

The main strategy of Zayo is in adding Allstream’s fiber and colocation assets to its communications infrastructure business. Allstream has over 9,000 route kilometers of metro fiber network concentrated in Toronto, Montreal, Vancouver, Ottawa, and Calgary that connect to approximately 3,300 on-net buildings.

Allstream also 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.

Dan Caruso, chairman and CEO of Zayo, said: “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.”

“As we stand up Zayo Canada, we are targeting CAD $300 million of revenue, a >40 percent EBITDA margin, and a high single digit growth rate,” said Karl Maier, president of Zayo International.

Zayo said it will reshuffle the other half of Allstream’s business into two additional segments: Voice and Universal Communications, which has approximately one-third of Allstream’s revenue, and Small Business which primarily focuses on enterprise voice.