Bt and AT&T Corp. Announce Strategic Telecommunications Investments in Canada - Rogers Cantel Mobile Communications, BT to acquire most of AT&T's equity position in AT&T Canada - Company Business and Marketing

Cambridge Telcom Report, August 16, 1999

British Telecommunications plc ("BT") and AT&T Corp. ("AT&T") have announced that they have agreed on two important transactions in Canada. First, BT and AT&T will jointly acquire a 33 per cent equity stake in Rogers Cantel Mobile Communications Inc. ("Rogers Cantel") for an aggregate of approximately Cdn $1.4 billion (US $934 million, pnds stlg577 million) in cash. The transaction significantly enhances the relationship between Rogers Cantel and AT&T formed in 1996, while adding a major new international partner.

Second, BT will acquire 30 per cent of AT&T's 31 per cent equity position in AT&T Canada for approximately Cdn $600 million (US $402 million, pnds stlg248 million).

In addition, Rogers Cantel and AT&T Canada will accelerate the bundling and joint marketing of wired and wireless services for Canadian business customers.

These transactions, following the BT and AT&T joint investment in Japan Telecom in April of this year, are the second major joint initiatives by BT and AT&T since the two companies announced their proposed US $10 billion global venture last year.

The closing of the transactions is expected to take place on or about August 16th, 1999. There is a payment for non-completion of the Rogers Cantel transaction payable by AT&T and BT to Rogers Cantel of Cdn $1.50 per share.

John D. Zeglis, President of AT&T, said, "Today's announcements represent a deepening of our commitment to the Canadian marketplace. The combination of AT&T, BT, Rogers Cantel and AT&T Canada will give Canadian businesses even better access to unrivaled mobile and wired services nationwide. And through our global joint venture with BT, Canadian companies will enjoy the seamless worldwide services they need to compete in the economy of the 21st century."

Alfred T. Mockett, President and CEO of BT Worldwide, said, "Rogers Cantel and AT&T Canada represent a significant addition to our global family of alliances and will enable BT to take an active part in the Canadian mobile and business wireline markets. Today's announcements are consistent with BT's strategy of concentrating on the fast moving, high growth areas of mobile, Internet and data communications."

Edward S. ("Ted") Rogers, Rogers Communications Inc. ("RCI") President and CEO, said, "This is an important day for RCI, Rogers Cantel and for the Canadian telecommunications marketplace. Today we are positioning Rogers Cantel for the future by aligning our Canadian strengths in wireless with two global telecommunications leaders, BT and AT&T."

Charles E. Hoffman, Rogers Cantel's President and CEO said, "Rogers Cantel embarked on the first stage of its relationship with AT&T in 1996 with a branding and technology alliance that included the co-branding of our products and services as Cantel AT&T. Today, we are strengthening that relationship to ensure that our customers and all Canadians will continue to have access to the best technology and wireless services wherever they travel -- across North America and internationally."

James J. Meenan, Vice Chairman and CEO, AT&T Canada, said, "We are delighted that BT has given AT&T Canada such a significant vote of confidence. This agreement further enhances our ability to offer one-stop shopping for business customers, provides seamless global reach for our Canadian business customers and closer ties with UK-based multi-national corporations."

Summary of the Investment in Rogers Cantel by AT&T Corp. and BT BT and AT&T will jointly acquire a 33.3 per cent equity stake in Rogers Cantel Mobile Communications Inc. ("Rogers Cantel") for an aggregate of approximately Cdn $1.4 billion (US$934 million, pnds stlg577 million) in cash. This ownership position will be held through a newly established entity ("Wireless Co"), 50 per cent owned by AT&T and 50 per cent owned by BT.

Wireless Co will purchase approximately 27.8 million new convertible preferred shares from Rogers Cantel at a price of Cdn $34.70 per share. These convertible preferred shares will be convertible on a one-for-one basis after one year from the date of issue into approximately 15.3 million Class A Multiple Voting Shares and 12.4 million Class B Restricted Voting Shares. AT&T will also contribute 1.04 million Class B Restricted Voting Shares to Wireless Co acquired by AT&T pursuant to its 1996 brand agreement with Rogers Cantel. The price paid represents a premium of approximately 27 per cent over the 30-day average closing price and approximately 29 per cent over the 60-day average closing price of the underlying Rogers Cantel Class B Restricted Voting Shares on the Toronto Stock Exchange.

Rogers Cantel will receive approximately Cdn $964 million into its treasury on the issue of these shares. In addition, Wireless Co will acquire approximately 12.3 million Class A Multiple Voting Shares of Rogers Cantel from RCI, also at a price of Cdn $34.70 per share, for a total of Cdn $427 million. As a result of these transactions, on a fully diluted basis, Wireless Co will own 33.3 per cent of the equity and 30.6 per cent of the Class A voting shares of Rogers Cantel. Under the Telecommunications Act, non-Canadians can own no more than 33.3 per cent of the voting shares of a Canadian telecommunications holding company such as Rogers Cantel. After this transaction, RCI will continue to own 69.4 per cent of the Class A Voting shares and 50.9 per cent of the equity of Rogers Cantel, on a fully diluted basis.