Aliant Inc.

Nova Scotia, New Brunswick, Newfoundland
and Prince Edward Island

Historical Notes

Startup 1 June 1999

On May 31, 1999, 3588378 Canada Inc. acquired 52,540,265 common shares of Aliant (the company under which Bruncor Inc. ("Bruncor"), Maritime Telegraph and Telephone Company, Limited ("MT&T") and NewTel Enterprises Limited ("NewTel") were combined on May 31, 1999), representing approximately 41.6% of the outstanding common shares of Aliant from BCE Inc. ("BCE"), the parent company of Bell Canada. Previously on May 28, 1999, 3588378 Canada Inc. had acquired all of BCE's interests in Bruncor, MT&T and NewTel, which interests were exchanged for the shares of Aliant. Bell Canada now holds 52,540,265 common shares of Aliant.

Source: SEDAR website
http://www.sedar.com/homepage.htm

Distribution of Aliant Shares

Each of the Predecessor Companies operated the principal telecommunications companies in the provinces of New Brunswick (Bruncor), Prince Edward Island (Island), Nova Scotia (MTT), and Newfoundland (NEL). The shareholders of the Predecessor Companies exchanged their shares for shares of Aliant Inc. as follows:
each Bruncor common share exchanged for 1.011 Aliant common shares;
each MTT common share exchanged for 1.667 Aliant common shares;
each MTT 7.00% preference share exchanged for 0.605 Aliant common shares;
each NEL common share exchanged for 1.567 Aliant common shares.
and each Island common share exchanged for 1.000 Aliant common share (other than those shares held by Maritime Holdings, a wholly owned subsidiary of MTT);

The share exchange resulted in a total of 126,437,484 Aliant common shares being issued, with the shareholders of the Predecessor Companies holding the following shares:

                                     Number of Aliant      % of
Shareholder group                     common shares       shares
                                                        outstanding

Bruncor former shareholders             44,151,541         34.9%
MTT former shareholders                 49,889,477         39.5%
NEL former shareholders                 28,862,997         22.8%
Island former shareholders               3,533,469          2.8%
     (other than Maritime Holdings)
                                       126,437,484

Source:
Aliant Inc. 1999 Management and Auditors Report, 9 February 2000
http://www.sedar.com/homepage.htm

Excerpted from
Aliant news release
28 July, 1999

Effective May 31, 1999, Bruncor Inc., Island Telecom Inc., Maritime Telegraph and Telephone Company, Limited and NewTel Enterprises Limited combined their businesses to form Aliant Inc., which began operations on June 1, 1999. The Company operates four reportable segments:

Telecommunications

– provides a full range of telecommunications services in New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador. Included in this line of business are NBTel Inc., Maritime Tel & Tel Limited, Maritime Tel & Tel Mobility Limited, Island Telecom Inc., NewTel Communications Inc. and NewTel Mobility Limited.

Information Technology

– provides systems integration, application development, local area network installation, wide area network management, data center operations, VAR and information technology planning services. Included in this line of business are Xwave Solutions Inc., MITI Information Technologies Inc., IT division of NB Tel and Island Tel Advanced Solutions Inc.

Mobile Satellite Communications

– provides a full range of satellite communications services to clients in the domestic and international marketplace. Included in this line of business is Stratos Global Corporation.

Emerging Business

– focused on developing and nurturing new technology-based products and services such as;
(1) computer telephony integration, TV over copper, high-speed e-commerce, and new media. This includes New North Media, iMagicTV, NBTel VideoActive Networks Ltd., and NBTel Global;
(2) electronics manufacturing carried out by NewTech Instruments Limited; and
(3) Supply and service of the east coast oil and gas industry as conducted by AMI Offshore Limited.

Aliant Telecom Inc. holds 100 per cent of Aliant Inc.'s interests in Island Tel, MTT, NBTel, NewTel Communications, MTT Mobility and NewTel Mobility.

Source: SEDAR website
http://www.sedar.com/homepage.htm

Excerpted from
1999 Management and Auditors Report
9 February 2000

At December 31,1999, the principal subsidiaries of the Company include:

Aliant Telecom Inc.
Island Telecom Inc.,
Maritime Tel & Tel Limited
MT&T Mobility Incorporated,
NBTel Inc.
NewTel Communications Inc.
NewTel Mobility Limited
Aliant Information Technology Inc.
xwave solutions inc.
MITI Information Technology Inc.
Aliant Horizons Inc.
Stratos Global Corporation
AMI Offshore Inc.
NBTel Global Inc.
ConneCTIvity Contact Centre Solutions Inc.,
Aliant Internet, LLC
Aliant Properties Inc.

Source: SEDAR website
http://www.sedar.com/homepage.htm

References:
Aliant Inc. website
http://www.aliant.ca/
Aliant Inc. corporate profile at SEDAR website
http://www.sedar.com/dynamic_pages/issuerprofiles_e/i00012285.htm

Aliant at Forefront of Telecom Revolution

by David Akin
Financial Post
Saturday, May 06, 2000

MONCTON, NEW BRUNSWICK – Jeff Kelly hasn't run the numbers on it and he doesn't have a spreadsheet in the back office with complicated supply-and-demand forecasts, but his instinct – the strongest forecasting tool at the disposal of store owners on Canada's main streets – tells him that what his local phone company is doing is going to be big.

Mr. Kelly is the president of Sounds Fantastic, a stereo and home electronics store in downtown Moncton, N.B. His local phone company is NBTel, the unit of Aliant Inc. of Halifax, a company with a reputation in and outside the province for being remarkably forward-thinking when it comes to next-generation services for its customers.

It is one of those next-generation services that has Mr. Kelly excited.

NBTel is the first phone company in North America to have a commercial television product that it distributes over old-fashioned phone lines.

Even though only a few hundred Moncton households have signed up for the service since its market debut in January, Mr. Kelly figures NBTel has a hit on its hands.

He recently opened up a second store, this time in a high-traffic area in the region's biggest shopping mall in Dieppe, the town next door to Moncton. The new store is a co-branding effort with NBTel, called NBTel Express, and there he sells cellphones, arranges for high-speed Internet access, takes NBTel payments, and shows off NBTel's new interactive television service, VibeVision.

Same Old Twisted Pair Copper Wires

VibeVision is a full commercial television service intended to supplant the local cable company's offering. (Shaw Communications Inc. of Calgary runs the local cable plant but its Moncton operation will go to Rogers Communications Inc. this year as part of a multi-system swap between the two cable giants.) The service runs over the same twisted-pair copper wires that have been used mostly for carrying nothing more glamorous than phone calls.

But with steady and expensive investments in its network, NBTel is finding that it can push a lot more down those wires than just phone calls. Using asymmetric digital subscriber line (ADSL) technology, NBTel has turned those copper wires into pipes to deliver voice, data and Internet traffic, and digital video television.

While the service still has some shortcomings, its subscribers are enthusiastic.

Awesome

"It's awesome," said Jean Arsenault, a 13-year-old, whose family gets the service at a discounted rate because they have volunteered to be what NBTel calls a listening post, a term the telecom uses to describe customers it relies on for regular feedback about the service.

Jean, who is in Grade 8, has been a particularly good listening post for NBTel's engineers.

He says the first thing VibeVision's software engineers ought to be doing is adding a chat function so keyboard users can communicate in real time over their television with friends.

And how about scroll bars on the Web page displays on VibeVision? Scroll bars, which let computer users move easily about a Web page, should be a natural.

And why can't the interactive on-screen TV guide be customizable? Shouldn't one be able to group all a family's favourite channels together for easier viewing and selection?

The whitecoats in the lab are working on all those features.

Jean's insights have been so helpful and his enthusiasm for the service so infectious that Stephen Wetmore, Aliant's chief executive, asked that Jean be part of a video presentation Mr. Wetmore made last year to the board of directors of BCE Inc., Aliant's majority shareholder.

As a reward for his good work, NBTel's technicians gave Jean an experimental wireless keyboard to use with his VibeVision.

Normally, VibeVision customers access the television, music, Internet, video-on-demand and other services using only the familiar remote-control device. NBTel's engineers have tried out a few keyboards, but there are concerns they won't hold up to daily use in a young family. NBTel's engineers expect to one day have a keyboard for use with the product.

Jean, though, loves the keyboard and uses it to glide quickly and seamlessly through the VibeVision suite of services.

That suite includes all of the television channels available on the local cable system and then some. Of particular value to the Moncton market, where about 30% of the region's population is French-speaking, is the availability of significantly more French-language channels than the cable system can provide.

The suite of services also includes the Galaxy digital music channels as well as all their local radio stations.

Internet access through the television for now is limited and less than robust. Users are free to surf the Web, but NBTel has not done anything to re-format Web pages – pages created for a single viewer sitting a foot in front of a computer screen – so they can be viewed on a television set by a family sitting on a couch 10 feet from the screen.

Additionally, e-mail use now is limited to reading mail and responding to it, but users cannot generate their own messages. Even responding is cumbersome since the only keyboard for most users is an onscreen kind in which a user presses the directional buttons on the remote to select a single letter. It's so slow and cumbersome as to be almost valueless.

VibeVision also includes an onscreen interactive television guide and a pay-per-view video-on-demand service.

NBTel has priced packages beginning at $36.95 a month and extending up to $59.95 a month.

And while NBTel and partners such as Mr. Kelly are happy to have it in the marketplace, they and others concede there is still much work to do before it can be a compelling alternative to the cable company for most New Brunswickers.

Bandwidth Limitations Still a Problem

The biggest drawback is that subscribers to VibeVision can hook up just one TV to the service and, like some satellite services, are unable to tape a program on their VCR while watching a different program on their television set. Similarly, VibeVision consumers cannot set their VCRs to tape a program on one channel and then switch channels to tape the next program.

Those drawbacks stem from limitations in bandwidth, which NBTel is hoping to increase as early as next year.

Despite the current limitations, Mr. Kelly says consumers who visit his mall store simply need to be told one thing: "This is television over your phone line. That gets the imagination going. We've found we've got to say it really simply to the customer."

Terry and Paul Ouellet found that proposition attractive enough they signed on for the service. Unabashed fans of all sorts of TV shows, the Ouellets love the interactive on-screen TV guide and say the picture quality through VibeVision is superior to what they were getting from the cable company.

Because VibeVision can serve only one television set, the Ouellets still have their cable service for the television in their bedroom, but as soon as VibeVision can handle two TVs, the cable company is out.

Dumb Cable Companies

"The cable company does dumb things. They add channels to your bill without your OK," Paul said.

Terry felt the same way. "When you have to wait for your repairman, you might as well write off your day."

"Service is a big thing for me," Paul said. "I know a lot of people at work and they just can't wait to get this."

Not everyone in Moncton can get VibeVision.

The physics of ADSL services being what they are, consumers must live near a phone company facility called a central office, a small building that houses some switches and routers that push telephone signals, Internet data, and new services such as VibeVision down the wires to homes.

In Moncton, consumers who live more than three kilometres from a central office cannot get VibeVision. "If we move, we're not moving anywhere unless we can get VibeVision," Terry Ouellet said.

So far, about 6,000 homes in Moncton are close enough to a central office to be VibeVision customers. Only a few hundred households have signed up since the commercial launch of the service in January. NBTel says that by June, about 25,000 Moncton households should be VibeVision-ready.

Moncton's population, at the 1996 census, was just under 60,000 people, although the Greater Moncton area, which includes Dieppe and other nearby towns, now numbers close to 100,000 spread among more than 35,000 households.

Once that's done, NBTel will have to start convincing consumers to cut their ties to the cable company. Can they do it? Jeff Kelly at Sounds Fantastics thinks so:

"Consumers here love NBTel. They've done such a good job of marketing themselves and they've been a good corporate citizen."

[The National Post, 6 May 2000]

Aliant at Forefront of Telecom Revolution

Aliant CEO Bullish on Emerging Businesses

One of the most difficult things when you're small is that your innovation has a difficult time getting to market. If you can develop your distribution channels, you can take good products and get them presented and in the door. – Stephen Wetmore, CEO of Aliant Inc.

by David Akin
Financial Post
Saturday, May 06, 2000

SAINT JOHN, NEW BRUNSWICK – Figuring out your company's worth to shareholders should be a simple 1-2-3 step, according to Stephen Wetmore, chief executive of Aliant Inc. of Halifax, the holding company whose chief assets are the four Atlantic Canada phone companies.

First, Mr. Wetmore said in a recent interview, share value is a function of a company's balance sheet, assets and debt. Second, investors boost share value for strong earnings and continuously improving financial performance. Finally, investors, particularly in the dot-com universe, are ready to award share value based on future expectations.

For phone companies, future expectations often meant more of the same which, for most of the last century, was just fine: continuing steady cash flows, decent profits, and reliable dividends made phone companies into blue-chip favourites.

Some of That Internet Lustre

But phone companies, in Canada and around the world, don't want to be known any longer only as safe havens for pension funds. They want some of that Internet lustre and the share values that go with that shine.

Mr. Wetmore knows this. That's one of the reasons he's bullish about Aliant's emerging businesses, companies such as iMagicTV Inc. or Info Interactive. These are the business units that, while perhaps not strong cashflow contributors, hold the promise for future growth.

Mighty BCE Inc. believes in Aliant as a growth company, one of the reasons it paid $435,400,000 in January to bump its position in Aliant to 53% from 41.4%.

Aliant is the relatively new amalgam of the four Atlantic Canada phone companies – Maritime Telegraph & Telephone Co., Bruncor Inc., NewTel Enterprises Ltd. and Island Telecom Inc. It has about 10,000 employees and, in 1999, posted revenues of more than $2,000,000,000.

At one point, the four Atlantic Canada phone companies, and particularly Bruncor, were seen as BCE's farm team. Executives who did well down east could look forward to playing in the majors at Montreal-based BCE.

"It's been a good farm team, though. They've ended up with a few Bobby Orrs," he joked.

"But as we've moved from traditional telephony into our growth strategy, we've moved away from the 'farm team' concept. In the last two years, with the explosion of dot-com stocks, people are looking for potential within their home corporation as opposed to saying, 'I want to go to a bigger company.' "

Certainly, there are still opportunities for Aliant's brightest stars to move to BCE and vice versa. But today, Aliant's engineers and business development executives are attracting attention from such firms as Cisco Systems Inc., Motorola Inc., Nortel Networks Corp., and other tech stars that offer significantly more upside than BCE.

The largely Toronto-based investment community is slowly coming to see Aliant the same way those tech players do.

"They're seeing the valuations of similar types of products on the market and they're saying if Aliant has this type of research so close to commercialization in their product portfolio, then they're worth a tremendous amount of money," Mr. Wetmore said.

Every Analyst Singled Out iMagicTV

In March 2000, Doug Kirk, a telecommunications analyst at Nesbitt Burns, wrote: "There is growing hidden value in the company's new business activities and we are particularly encouraged by the potential of [iMagicTV's product]."

Jonathan Robins, an analyst at National Bank Financial, wrote that Aliant's emerging business portfolio was "a key to incremental shareholder value."

Every analyst singled out iMagicTV, which delivers television services over phone lines, as a potential winner. Mr. Robinson noted that Next Level Communications Inc., which makes a hardware technology that fits into iMagic's space, had a market valuation in mid-March of US$12-billion.

Until those riches are in the bank, though, Mr. Wetmore wants his emerging business unit to operate, as closely as possible, at a break-even point. In this respect, the unit has sought out and received research contracts from the likes of Nortel and Newbridge Networks and has managed to earn some licensing revenue from technology it has developed.

Mr. Wetmore's strategy is based on the reality that Aliant doesn't have the resources to do it alone.

"One of the most difficult things when you're small is that your innovation has a difficult time getting to market. If you can develop your distribution channels, you can take good products and get them presented and in the door and collaborate with other large organizations," Mr. Wetmore said. "Years of working with the larger telcos of the world, whether it's Telstra or US West or Bell Atlantic, has given us these distribution channels. It's very important for us to foster those relationships."

[The National Post, 6 May 2000]

Convergence HQ

Cisco Systems Executives Arrive Regularly

by David Akin
Financial Post
Saturday, May 06, 2000

SAINT JOHN, NEW BRUNSWICK – It can take a full day of jet travel to get from Cisco Systems Inc.'s head office in San Jose, California, to NBTel's head office in Saint John, New Brunswick.

But senior Cisco executives regularly make that trip to keep their eye on the next-generation communication technologies NBTel and its subsidiaries are working on.

Cisco isn't the only high-tech superstar interested in NBTel's work. Nortel Networks gives NBTel, a unit of Aliant Inc. of Halifax, $6,500,000 a year to figure out new ways to move bits and bytes around communication networks. Representatives from Newbridge Networks, Microsoft Corp. and others also regularly make the trip.

They go to keep an eye on new developments in Aliant's portfolio of emerging business units, businesses that include Info Interactive, Neuromedia, New North Media, and NBTel Global.

"Most of the things we do are because there's a propensity to innovate here," said Bob Neal during an interview last month in his office overlooking the mouth of the Saint John River. "I'm not sure what the cause of that desire is."

On Thursday, Mr. Neal was appointed president of another company in Aliant's emerging business portfolio, Innovatia Inc.

Before that, Mr. Neal, a 22-year-veteran with NBTel, had been vice-president of Aliant's emerging businesses unit. Innovatia is developing software that lets service providers stream full television services over a high-speed digital subscriber line (DSL) Internet connection to PC users. Innovatia this week announced a three-month trial of its service in Saint John and Moncton.

NBTel funds these new companies in order to develop new services for its own customers. But it knows if it can find a way to deliver cutting-edge services in a small market scattered across a large area, its technology will be valuable to plenty of other companies around the world.

"We're adapting new technologies to low-density markets," Mr. Neal said in April.

The star is iMagicTV

The star, right now, in Aliant's portfolio is iMagicTV Inc., which creates software that enables telcos such as Aliant to deliver a full suite of television services to consumers over old-fashioned copper phone lines.

"iMagic TV has the potential to be a major breakthrough in terms of enabling [telco] equipment to carry interactive TV applications over a traditional copper wire network," Richard Talbot, an analyst at RBC Dominion Securities, wrote in a recent report.

iMagic got its start in 1998 with just six people, most of whom came from a telco background. Today, there are about 140 people working for the company. Its Saint John head office, a few floors beneath Mr. Neal's, is cluttered with routers, switches, television terminals, computers, and, of course, dozens of young men and women, casually dressed, who design, write and tweak iMagic's software code.

There is speculation an initial public offering of the company's shares on the technology-mad Nasdaq market may be in the offing some time later this year.

Mortal Enemies

iMagic, and the work it and NBTel are doing in Saint John and Moncton, has become of increasing interest to the world's telephone companies, most of which are just coming to the realization their comfortable dominance in the local telephone market may soon come to an end. Their mortal enemies, for now, are the titans who run cable networks, once used only for television and now, thanks to the cheap, efficient Internet technology, about to be used to carry local telephone traffic.

"For the first time, probably in the history of telephony, a competitor can take away a customer [of a telco] for everything," David Alston, iMagic's senior director of product management and planning said during a recent presentation in Toronto.

In the past, even if a local telco lost a customer's long-distance business or dial-up Internet business, that customer was still in the telco's database buying local telephone services.

But as cablecos become ready to do everything Ma Bell can do, telcos worry their last tether to the core customers will be lost.

Offensive Weapon

But if the work in Moncton is any indication, iMagic's software will give those telcos ready to spend the money upgrading their network hardware an offensive weapon in the coming convergence wars – at a cost the cablecos may have trouble matching.

iMagic's and NBTel's showcase project for now is VibeVision, a commercial television-over-phone-lines service available now only in some areas in Moncton.

The current suite of services now in the market in Moncton under the VibeVision brand is expected to be soon supplemented with more. Television programming, Internet access and video-on-demand are so-called 'anchor tenants,' services the telcos believe they must offer in order to attract enough customers. With those in place, imaginative telcos – and that phrase is not such an oxymoron when used in the New Brunswick context – will look to add more applications and services into the mix.

For example, TV messaging may soon be a possibility. With such a service, when the phone rings, a message can flash up on the TV screen indicating who is calling. A similarly styled e-mail notification is also a possibility. The system can also provide reminders for birthdays and other events.

"The more we enhanced the service, the more [customers] used it," Mr. Neal said. "The more they use it, the more money we'll make."

[The National Post, 6 May 2000]

References:
Aliant Inc. corporate profile at SEDAR website
http://www.sedar.com/dynamic_pages/issuerprofiles_e/i00012285.htm
Aliant Inc. website
http://www.aliant.ca/

Go To History of Telephone Companies in Nova Scotia
http://epe.lac-bac.gc.ca/100/205/300/nova_scotias_electronic_attic/07-04-09/www.littletechshoppe.com/ns1625telephone.html
Go To Home Page
http://epe.lac-bac.gc.ca/100/205/300/nova_scotias_electronic_attic/07-04-09/www.littletechshoppe.com/ns1625index.html