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The MTS building in downtown Winnipeg.Joe Bryksa/The Canadian Press

Manitoba Telecom Services Inc.'s deal to unload its underperforming Allstream division after years of trying is a triumph of the art of making the best of a bad situation.

The asset was shopworn, having been on the block for years. The expected price was steadily dropping. First there was talk of $1-billion. Then $500-million. Then $300-million. Meantime, the Allstream division was sucking up cash and making investors wonder if MTS could sustain its dividend. In this space, I once argued that MTS should just give the division away if that is what it would take to get past the Allstream issue. Any price would be a good one.

So to see an announcement that MTS got $520-million from Accelero Capital Holdings, a company run by telecom investor Naguib Sawiris, is a win for the MTS team. And even though the price is half what some optimists once thought might be on the table, MTS shares reflect the optimism that now the company can move on.

In the end, there were at least two solid bids. The Sawiris bid came out on top, and the expectation is that Accelero may now look to buy Wind Mobile, which is also for sale (and which Mr. Sawiris was involved in starting) to create a company that could offer businesses a bundle of wireless, calling and data on a national basis.

The numbers are not pretty for MTS no matter how you look at it. The company paid $1.7-billion for Allstream in 2004. The company computes its return on investment at –1 per cent, pointing to the "$300-million of cash Allstream had on its balance sheet at the time the acquisition, the realized value of approximately $3-billion of Allstream tax losses, as well as the cash generated for the Company by Allstream over the period of the Company's ownership."

MTS will get net cash of $405-million. But it has to keep funding Allstream's pension plan, payments that have a net present value of $87-million.

Offsetting that, MTS gets to keep remaining tax assets from Allstream, which would have no real value to Accelero because you need a profitable Canadian business to use them.

For shareholders, it's arguably been worse than the 1 per cent negative return, because Allstream has been a drag on the valuation of MTS, and hindered the company's ability to pay dividends.

But it was all sunk costs, and the best decision was to get the best price possible and move on.

(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)

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