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Rural broadband projects in jeopardy

Monday, September 14, 2009

by BETTER FARMING STAFF

An interim receiver may find a buyer for financially troubled Everus Communications, based in western Ontario, as early as this week.

But even if it does, it’s likely that Grey County is likely to seek a deal with a new supplier for its $4 million business to supply prospective customers.

Geoff  Hogan, Grey County’s director of information technology, says even if the company is sold, “it’s very likely we’ll go back to the market in any case.”

Other companies have to be given a chance to bid on the process, he explains. Moreover, Grey signed with Everus nearly a year ago and other private sector companies may have filled some of the gaps in service that the county had identified. “It’s certainly not our intention to use public funds to try and compete with other companies,” he says, pointing out the money is intended only for areas without high-speed broadband service.

Only a few months ago Waterloo-based Everus, which started in Mount Forest as High-Speed FX, and had 3,000 customers in western Ontario, was flying high.

By June it had snagged contracts to fill broadband Internet service gaps in Grey, Wellington and Dufferin Counties – projects estimated to cost $4 million, $5 million and about $600,000, respectively. A year earlier Everus had received $5 million in financing from Toronto-based, publicly traded merchant bank C. A. Bancorp.

But by July 31 Bancorp, which wanted its investment returned because of tough financial markets, had pushed Everus into interim receivership. The company couldn’t find the cash to finance the three county service contracts. While all of the projects have received one third provincial funding and at least one county has also chipped in some financing, the provincial program requires the Internet service provider pay up front for the entire project before it can obtain the grants in the form of reimbursement.

Since then, interim receiver, BDO Dunwoody Ltd., has put Everus on the sales block. More than a dozen parties have shown interest so far, says Uwe Manski, a partner in BDO’s Toronto office. The first round of offers is due Sept. 18. 

That’s the same day Grey County wants the company to confirm whether it can complete the project and meet the county’s terms, which include providing a letter of credit that can be cashed if Everus doesn’t perform to expectations.

It hasn’t helped that on Sept. 12, vandalism at the company’s main tower in Wellington County knocked out service to all of its customers. By Monday, service to about 2,400 customers had been restored and Richard Cantin, the company’s president, estimated the damage at $100,000-$150,000. Insurance will cover some of it, but “this is not what a small business needs,” he says.

Despite the challenges, Cantin remains optimistic. He calls the company a “dominant player” in providing rural broadband service; notes that its business plan predicts it will expand to more than 7,000 customers within 2.5 years; and expresses confidence that a buyer can be found.

Officials in Dufferin and Wellington Counties could not be immediately reached for comment. BF

 

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