Canada’s Telus accelerates national expansion with PSINet deal

Canadian carrier Telus is set to benefit from the financial troubles of bankrupt IP and Internet service provider PSINet, as it looks to acquire the latter’s assets in that country.

The acquisition would allow Telus to accelerate its plans to expand out of its traditional territory and become a nationwide provider of business-class Internet services.

Just 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 to businesses and ISPs, also filed for bankruptcy protection in that country.

Along with that announcement, the company said that it had signed a letter of intent to sell its Canadian operations to Telus, the dominant service provider in Western Canada.

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

In addition, Telus will take over PSINet’s 275 Canadian employees and 8600 business accounts. The deal, which must receive regulatory approval as well as approval from bankruptcy courts in both Canada and the U.S., is expected to close around the end of July.

The acquisition, said the Telus 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 company brings us talented and skilled people in these areas. …They also have a very valuable customer base and facilities.”

Indeed, the PSINet acquisition is the latest and one of the most significant moves Telus has made in its eastward expansion.

“It’s fabulous news for Telus,” said Iain Grant, managing director of The Yankee Group in Canada. “It gives them an install base, presence, momentum and existing relationships. …They’ve been heading east for a while. With this acquisition they are front and center.”