Eastward ho!

Canadian carrier Telus is set to benefit from the financial troubles of bankrupt IP and Internet service provider PSINet.

More than a week ago, PSINet announced that it was seeking protection under Chapter 11 of the U.S. Bankruptcy Code. Four of its Canadian subsidiaries, which provide Web hosting, Internet access, e-security and e-commerce application services, also filed for bankruptcy protection in that country.

PSINet said it had signed a letter of intent to sell its Canadian operations to Telus, the dominant service provider in Western Canada.

With the acquisition, Telus accelerates its plans to become a nationwide provider of business-class Internet services.

Final terms of the sale have not been settled, but a Telus spokesman said the company will pay less than $100 million for PSINet assets, which include about 50 points of presence, including POPs serving Toronto, Montreal, Ottawa, Edmonton, Calgary and Vancouver.

Telus will take over PSINet's 275 Canadian employees and 8600 business accounts. The deal, which must receive regulatory approval and approval from bankruptcy courts in Canada and the U.S., is expected to close in late July.

Telus' acquisition, said the spokesman, will allow the company “to grow our business in Central Canada, since a lot of the operations and the customer base are in southern Ontario. The [acquisition] brings us talented and skilled people in these areas.

Indeed, the PSINet acquisition is the latest and one of the most significant moves Telus has made in its eastward expansion, said Iain Grant, managing director of The Yankee Group in Canada.

“It gives them an install base, presence, momentum and existing relationships,” Grant said.