Ministers comment on Aliant�s plan to pursue possible sale of Xwave

Joan Marie Aylward, President of Treasury Board and Minister of Finance, and Kelvin Parsons, Minister of Industry, Trade and Rural Development, today commented on Aliant�s announcement that it will conduct a review of its information technology business � xwave � which could include the eventual acquisition of xwave by another company. Aliant has announced that it no longer considers xwave to be strategic to its long-term core business interests.

Minister Aylward said government has an obvious interest regarding a potential sale of xwave. "Xwave currently provides most of government�s IT services and we have an Industrial Benefits Agreement with xwave that requires them to bring new business to the province, create new jobs within the company�s Newfoundland and Labrador based operation, and to subcontract work out to our local IT industry. However, no matter who owns xwave, the company�s contractual obligations to government, including those contained in the Industrial Benefits Agreement, would follow any new owner."

Two weeks ago, xwave announced a reduction of its workforce in this province, but agreed to prepare a remediation plan to demonstrate how it intends to fulfill all of its obligations under the Industrial Benefits Agreement.

"Xwave advised government yesterday that it has made progress in meeting government�s requirements in this regard, through the securing of new contracts, and is on schedule to report back to government on its specific plans within the next two weeks," said Minister Parsons. "Aliant has also undertaken to keep us informed as it works through its business options on any possible sale of xwave, but this issue will not deter us in the meantime from ensuring it lives up to its obligations under the existing Industrial Benefits Agreement."

Minister Aylward emphasized that government will review any prospective sale of xwave very closely, given that government must give its consent to the assignment of its IT services contract to any new owner. "Government would only do this if it can be clearly demonstrated, with the benefit of advice from Nati, that a new owner has the required vision, commitment, experience and resources to ensure xwave remains a strong and viable company in Newfoundland and Labrador and one that continues to support the growth of our overall IT industry."

Until 1994, a publicly owned entity called Newfoundland and Labrador Computer Services provided government IT services. Government sold NLCS to NewTel that year for $9 million and a commitment from NewTel that the company would create new jobs and attract new business to the province, including subcontracted work to other local IT companies.  This resulted in the creation of xwave.

Government renewed its initial 1994 seven-year contract with xwave in July 2001 for an additional term that will now expire on March 31, 2007. A comprehensive Industrial Benefits Agreeement was negotiated as part of the contract extension.

Since government�s initial contract with xwave in 1994, employment at the company�s St. John�s based operation has grown to 560 positions from 300 positions. Until the recent downturn in the IT industry, xwave was successful in meeting all of its contractual commitments with government.

Media contact: Josephine Cheeseman, Communications (709) 729-0329, 687-3353.

2003 01 24                                      3:20 p.m.