Released on September 6, 1995
Ned Shillington, minister responsible for the Crown Investments
Corporation, today announced that SaskTel has signed an agreement to
sell its United Kingdom cable holdings to Diamond Cable Communications
PLC of the U.K. for more than œ60 million (more than $125 million
Canadian). The transaction is expected to close shortly following the
receipt of customary United Kingdom regulatory approvals.
The corporation anticipates it will realize a profit of more than $100
million Canadian from the transaction, about triple its original
investment.
Shillington praised SaskTel for its foresight to diversify its
operations internationally. He added that Saskatchewan residents will
be the direct beneficiaries of the sale, as the proceeds will be used
to pay down the province's accumulated debt.
"Part of my government's platform for its second term in office
included a commitment to reduce the overall government debt by $1.2
billion. The sale proceeds put us closer to meeting that goal."
As part of the sale, SaskTel, through its UK cable holding companies,
will divest its interest in cable franchises for the communities of
Leicester, Shepshed, Loughborough, Hinckley and Burton-Upon-Trent.
SaskTel's venture into the UK cable market began in 1990 through its
investment in the Leicester Communications Company. More than $28
million has been invested since 1991, culminating earlier this year
with the successful acquisition of franchises in Hinckley and Burton-
Upon-Trent.
SaskTel president Fred Van Parys said the corporation had two potential
options -- continue to expand its cable holdings by injecting more
money and waiting several years until dividends were paid, or accepting
a lucrative offer to sell.
"Competitive pressures and consolidation in the UK cable market have
increased the immediate value of SaskTel's investment, but also the
inherent long term risk of staying involved. Additional equity would
have been needed to start up the new franchises, and it was unlikely
that SaskTel and the province would see a dividend paid back before the
year 2001.
"The prudent approach for SaskTel -- and the people of Saskatchewan --
was to exercise the lucrative offer to sell now."
Van Parys said the sale should not be interpreted as a sign that
SaskTel plans to discontinue its highly-successful diversification
initiatives. He indicated that the corporation remains focused on its
goal to have 40 per cent of revenues from diversified sources by 1998.
"We have a number of global initiatives underway to achieve that goal,
including major contracts in the Philippines, Chicago and Detroit.
We'll be placing an even higher priority on searching out new
opportunities."
-30-
For more information, contact:
Mark Stobbe
SaskTel
Phone:(306) 777-4105
UNITED KINGDOM CABLE SALE -- UNDERSTANDING OWNERSHIP
SaskTel, through the SaskTel UK holding company, holds shares in
two separate ventures, the East Midlands Cable Group Ltd. and East
Midlands Cable Holdings Ltd.
The East Midlands Cable Group Ltd. is owned by SaskTel, Fundy
Cable and John Laing PLC. The East Midlands Cable Group
possesses, through separate companies, cable franchises for the
communities of Leicester, Shepshed, Loughborough (all part of LCL
Cable Communications Ltd.) and Hinckley.
The East Midlands Cable Holding Ltd. is owned by SaskTel and Fundy
Cable. The East Midlands Cable Holdings possesses, through a
separate company, the cable franchise for Burton-Upon-Trent.
All of East Midlands Cable Group Ltd. and the East Midlands Cable
Holdings Ltd. will be sold to Diamond Cable of the United Kingdom.
A CHRONOLOGY OF SASKTEL'S INVESTMENT IN UK CABLE HOLDINGS
1990: Approximately $561,000 (*) invested in Leicester
Communications Limited. SaskTel is a 31 per cent owner in
LCL.
1991: Approximately $5.95 million invested.
1992: Approximately $1.53 million invested.
1993: Approximately $6.99 million invested. Name changed to LCL
Cable Communications Ltd. as the corporation begins offering
telephone service; SaskTel now owns 56 per cent.
1994: Approximately $12.1 million invested.
1995: Approximately $7.93 million invested. Total investment since
1990 is approximately $35.1 million. New franchises granted
for the communities of Hinckley and Burton-Upon-Trent.
(*) all figures in Canadian dollars.
UK CABLE HOLDINGS -- OPERATING FACTS (*)
LCL Cable Communications currently employs 157 people; five are
employees on long term assignments from SaskTel.
LCL serves approximately 750 business customers with telephone
service, with more than 2,500 business lines in service. LCL
serves about 8,700 residential cable TV customers and
approximately 12,800 residential telephone customers.
There are approximately 200,000 homes in the
Leicester/Loughborough/Shepshed serving area, 36,000 in the
Hinckley serving area and 78,000 in the Burton-Upon-Trent serving
area.
(*) figures as of July 31, 1995
