Fibre-optic networks power utility spinoffs

A cluster of orange dots on a map that delineates Atria's little kingdom reveals some obvious gaps in places such as Toronto, Kingston and Peterborough that it would like to fill.

"It's nice to grow," Steven McCartney, Atria's chief executive officer, said in a recent interview.

"There's nothing quite as much fun as building."

Atria was created from the telecom assets of several power companies, and its strategy is to pick up other enterprises like itself. It covets their extensive fibre-optic networks, the backbone of today's speedy Internet access and other services that demand more bandwidth.

Electricity companies first moved into the telecom market at the start of this decade. They began using their fibre-optic networks, built to manage their electricity grids, to offer telecom services. Their first focus was local customers, such as schools and hospitals. They then expanded into the crowded commercial market, the domain of giants such as Bell.

They have remained comparatively small operators, focused mainly on data services such as Internet access and storage. Atria and the other hydro phone companies don't disclose their financial results, but IDC analyst Lawrence Surtees estimates their 2007 revenue, at about $280-million, was little changed from the previous year. In contrast, Bell and the other big carriers took home $26-billion in telecom revenue in 2006, according to statistics from the federal telecom regulator.

Many power companies are reluctant to develop what they consider a non-core business by expanding outside their territory. As a result, they are cashing out of telecom and focusing once more on electricity. With telecom they are "getting away from their knitting, which is hydro," Mr. Surtees said.

That was the case for Telecom Ottawa Holding Inc., Atria's most recent purchase. Parent Hydro Ottawa Holding Inc. ran a profitable telecom business, but recognized it would require continuing capital expenditures, according to CEO Rosemarie Leclair. She reckons Hydro Ottawa will reap a $20-million profit from the $63-million sale.

Atria itself was in the same position in 2006, when its power company owners agreed to sell the telecom unit to Birch Hill Equity Partners, a Toronto-based private equity firm.

The new owners are backing Atria's push beyond its traditional base of Waterloo, Kitchener, Cambridge and Guelph.

Atria purchased SCBN Telecommunications Inc. in 2007, moving into Barrie. Later that year, it bought the fibre-optic assets of PowerStream Inc., adding Markham, Richmond Hill and Vaughan. Further purchases followed this year in Hamilton and Ottawa.

The company would like a chance to grab Toronto Hydro Telecom Inc., but it's not clear that the business is for sale. Some parties have expressed interest in buying the telecom carrier, but the parent, Toronto Hydro Corp., is still considering whether it will follow through with a sale.

"The whole thing's on hold," said Mr. McCartney, who joined Atria's predecessor in 2002 after a long career at Bell followed by a wireless startup. "I guess if it was to come back on the market, and it still made sense, I think we would pursue it."

Atria is clearly the most aggressive acquirer in the sector, although Mr. Surtees said a few others are picking up these assets.

Last month, Cogeco Cable Inc. bought MaXess Networx, the telecom arm of Windsor's energy company. In 2006, Oakville Hydro Corp.'s telecom business, Blink Communications, snapped up the fibre-optic assets of its next-door neighbour Enersource Telecom Inc. in Mississauga.

A larger network lets Atria hook up more of its customers' offices throughout the province, helping to attract larger commercial clients.

For a telecom company that few consumers may have heard about, Atria counts a number of household names as customers, including Research In Motion Ltd., Linamar Corp., Home Hardware and Sleeman Breweries Ltd.

"Those customers become available because you can do all the sites," Mr. McCartney said.