TORONTO — Bell Canada is acquiring 750 The Source consumer electronic stores across the country, a deal by Canada's biggest phone company that will ratchet up the pressure against rivals to sell more cellphones, technology and services to Canadians.
The Montreal-based phone company owned by BCE Inc. (TSX:BCE), said late Monday it will acquire The Source by Circuit City for considerably less than the $335 million paid by Circuit City in 2004 for the retail chain.
BCE declined to offer specifics on the acquisition price because U.S.-based Circuit City has filed for bankruptcy protection and plans to liquidate its operations in the United States.
The announcement marks the first major deal for BCE since the collapse of its planned $52 billion cash and debt sale to private investors late last year, and Bell Canada moves to cut costs and become more competitive.
Bell says the acquisition will more than double its national retail network to 1,450 outlets, The company wants to use the stores to carry a range of consumer services, such as Bell Mobility and Solo Mobile cellphones as well as television, Internet and phone products by January 2010.
The "acquisition supports Bell's strategic imperatives to accelerate wireless and leverage momentum in wireline services like Bell TV, Bell Internet and Bell Home Phone," Bell president and CEO George Cope said in a release.
Bell said acquired stores, which have about 3,000 workers, will continue to operate under The Source name, and carry a similar line of electronics.
"There is no interest on our part of closing a large number of stores. We're buying it to gain access to a large number of locations and we're certainly not coming at it with the idea of closing a number of them," said Wade Oosterman, president of Bell Mobility.
"It was all about gaining distribution access for us."
The Source has been profitable for the last seven years, reporting $27 million in earnings before taxes depreciation and amortization, and revenues of $643 million in 2008, Bell said.
The stores, which sell everything from cellphones and batteries to TVs, parts and other consumer electronics, have been on the market since Circuit City and its Canadian subsidiary sought court protection from creditors late last year.
Circuit City has since declared bankruptcy but its InterTAN subsidiary has continued to operate while it auctioned off its Canadian chain of electronics stores, many of them former Radio Shack locations.
Bell's acquisition of The Source is an early move by Cope, a former senior Telus (TSX:T) executive, to grow Bell's business since taking over the company last summer.
In recent months he has focused on cutting costs, which included layoffs, a streamlining of white collar staff and other belt tightening throughout its operations.
'They're striking up more significant competition," said Wendy Evans, head of retail consultancy Evans and Co. Consultants Inc.
'It's a brilliant move for Bell to further that retail distribution channel. They'll be able to compete on a much larger geographical base with Rogers."
Both Bell and Rogers already own store front locations that sell an array of electronics, but primarily stock their subscription-based mobile, Internet and cable devices.
However, last summer Rogers announced plans to convert all of its video stores into generalized Rogers Plus stores reflect its growing focus on cable TV and wireless services.
The Source currently sells wireless handsets, Internet and home phone services from Rogers (TSX:RCI.B) at 350 of store's locations, which are under an exclusivity contract that expires at the end of the year.
"Regardless of today's announcement I would say that it's business as usual for Rogers and we continue to expand our distribution channel in the places that work best for our customers," said Rogers spokeswoman Liz Hamilton.
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