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Canada's Big Telecoms Grapple With Uncertainty, Change

Canada's major telecommunications companies are facing separate moments of truth next week as Bell Canada's future rides on accounting minutia and Rogers Communications must begin the process of finding a new leader after founder Ted Rogers died this week.

With support for its huge buyout slipping away, Bell Canada, or BCE, has until Thursday to come up with a way to save the takeover of Canada's largest telecom company by a buyout combine led by the Ontario Teachers' Pension Plan and a conglomeration of buyout firms and banks. If successful, the $50 billion buyout would be the world's largest.

As for Rogers, Canada's largest mobile phone service provider, the company said chairman Alan Horn will serve as interim chief executive during a period in which a new chief executive will be sought. Ted Rogers built the company and rode it to the top of Canada's wireless world to a market valuation of about $18 million. The company has 24,000 employees.

At BCE, waves of investors and bankers and lawyers have been trying to salvage the buyout deal that was thrown into a financial abyss last week when it failed a solvency test. The chief reason for the collapse was the global financial meltdown and the heavy debt the buyout would have incurred, but different participants are still working to find a solution.

"Who is responsible for this mess?" was the reaction of one BCE director when informed that the failed solvency test was a likely deal breaker, according to a report in Wednesday's Globe and Mail.

BCE has challenged the accounting veracity of the solvency report by KPMG. Several U.S. players have been involved in the deal, including Providence Equity Partners, Citigroup, Merrill Lynch, and Madison Dearborn Partners.

In the meantime, the telecom business goes on uninterrupted elsewhere in Canada as its No. 2 company, Telus, announced that it would deploy 40G optical technology from struggling Nortel Networks for its fiber optic networks.

"Nortel's 40G is a plug, play, and evolve technology that is deployable over any fiber in a simple network design, giving operators an easy an efficient way to quadruple their network capacity," said Philippe Morin, president of Nortel's Metro Ethernet Networks unit, in a statement.