In a case of "my enemy's enemy is my friend", Canada's two rival cable providers have cut a $2.7bn (C$4bn) deal, swapping cable assets and merging their high-speed Internet access services, to prepare for battle against the nation's principal telco, BCE.

The swap sees both companies consolidating their territorial fortresses. Toronto-based Rogers, whose customers are concentrated in Ontario and Eastern Canada, will sell its cable business in Western Canada to Calgary-based Shaw, whose business is concentrated in the provinces of Alberta and British Columbia. In turn, Shaw will sell to Rogers holdings in southern Ontario and the Maritime province of New Brunswick. The swap should provide both companies the economies of scale necessary to compete in the residential telephony market.

The deal also sees the two companies merging their high-speed Internet access services - Rogers' @Home Canada and Shaw's Excite Canada - into a new entity, Excite@Canada, to be majority controlled by Rogers with a 51% share. Shaw and US-based @Home Corp will hold 22.5% stakes.

Excite@Canada will have 500,000 subscribers, more than five times the customer-base of BCE's Sympatico DSL service. In addition, Rogers will join Shaw, to the tune of $85m, as an equity investor in 360networks, the Vancouver-based broadband network currently constructing a 90,000km fibre optic network. Earlier this week, Shaw announced a $68m investment and a $153m usage contract with 360networks (Screendaily March 22).

The long-time and once bitter rivals have clearly taken heed of BCE's stated intention to invest $680m in Sympatico. Indeed, Bell has scheduled a press conference for Monday.