* BCE to pay C$40/shr, a premium of 22 pct
* Company to assume Manitoba Telecom's debt of about C$800
mln
* BCE to invest C$1 bln over 5 years after deal closing
(Adds analyst, CEO, lawyer comments, share price move)
By Euan Rocha and Arathy S Nair
May 2 (Reuters) - BCE Inc's BCE.TO C$3.1 billion ($2.5
billion) friendly bid for Manitoba Telecom Services (MTS)
MBT.TO , the latest in a string of major Canadian telecom
deals, is expected to test regulatory bounds and may need
further concessions to win approval.
Canada's largest telecom and media player, BCE, said on
Monday the C$40 a share cash and stock deal would significantly
expand its western Canadian footprint.
While a move on MTS was widely expected after the company
sold its Allstream unit to U.S.-based Zayo Group ZAYO.N last
year for C$465 million, winning approval will be no cinch,
according to industry insiders.
"We do not believe regulatory approval will be automatic,"
said Desjardins analyst Maher Yaghi in a note, adding he expects
scrutiny to be as high as that on BCE's takeover of media rival
Astral. That deal was originally blocked by regulators before
getting the nod after BCE agreed to sell some assets.
Despite regulatory concerns, the 22 percent premium offered
by BCE was cheered by MTS investors, and shares in the company
rose 15.4 percent to C$37.90 in afternoon trading, while those
in BCE slid 30 Canadian cents to C$58.54.
Yaghi noted that the deal would reduce wireless competition
in the province of Manitoba and give BCE close to a 30 percent
national share of Internet and television subscribers.
Despite this, BCE and MTS said they were confident that a
deal will be approved, but warned the review process is likely
to take 9 to 12 months to complete.
BCE, which operates as Bell, said it would divest one-third
of MTS's post-paid wireless subscribers to Telus T.TO after
the close of the initial deal to allay regulatory concerns and
trim its cash outlay.
"Bell have certainly set-up a plausible premise for
regulators to consider," MTS Chief Executive Jay Forbes said in
an interview.
Still, at least one Canadian competition lawyer, speaking on
condition of anonymity to safeguard client relationships, said
this move alone may not be enough.
"I do think that BCE, in addition to giving up subscribers,
may be required to sell some of its spectrum in the province in
order for this to be approved," said the lawyer, who sees an
approval potentially opening the doors to some much larger deals
in the sector including a tie up between Bell-Telus; or Rogers
Communications RCIb.TO and Shaw Communications SJRb.TO .
The combined company's Manitoba operations will be known as
Bell MTS and Winnipeg, Manitoba will become BCE's Western Canada
headquarters.
(Editing by Maju Samuel, Saumyadeb Chakrabarty and Shounak
Dasgupta)