Mark Evans

Michael Sabia's Core Strategy

Over the past two years, BCE CEO Michael Sabia has pursued a strategy focused on core telecom network assets. In pulling a u-turn away from predecessor Jean Monty's ambitious multi-billion dollar convergence agenda, Sabia has returned BCE back to its roots. From buying the 20% stake back from SBC Communications and privatizing Bell Mobility to acquiring 360Networks' Canadian assets earlier this week for $275-million, Sabia's strategy is clear. The big question is how long will Sabia hold on to BCE's media assets - the Globe & Mail and CTV. In a conference call earlier after the 360Networks deal, he danced around the subject - citing the Globe's good performance and the fact CTV has 14 out of the top 20 shows. He mentioned that BCE is trying to figure out where content fits into its communications strategy. Hah! Sabia simply waiting for market conditions to improve so he can sell BellGlobeMedia to the right buyer at the right price. With 360Networks in the fold, watch Bell pour lots of money into going after Telus Corp.'s corporate business in Alberta and B.C. If Telus CEO Darren Entwistle thought he had problems with a contentious labor situation, a wireline business that is eroding and a difficult hostile bid for Microcell Telecommunications Inc. he ain't seen nothing yet.

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VON Canada

Jeff Pulver's VON roadshow rolled into Canada for the first time last week with a lineup that featured Skype Technologies CEO Niklas Zennstrom. VON's debut was timely because VOIP is just starting to gain momentum in Canada with Primus and Vonage offering service, while Yak Communications, AOL Canada and Telus planning to start later this year. As the show's star attraction, Zennstrom spoke during two sessions on the first day of the show. Right now, he is acting the role of the technology pioneer - preaching to the masses about how peer-to-peer technology will revolutionize the US$300-billion telecom industry. His major argument is Internet telephony will unleash a tidal wave of innovation because services can be developed at the edge, rather than by carriers within the network. It is an intriguing presentation because who wouldn't like better and/or more services. But the issue I have troubling grasping is how Skype plans to make money. People using the software like the fact it's free, particularly if you're making international phone calls. But what happens when Skype tries to get people to pay for value-added services such as voice mail and access to the PSTN? What happens when incumbent carriers offer Internet telephony services? Perhaps it's the lengthy hang-over from the dot-com boom when the media - myself included - fell over itself writing about start-ups with great technology but unviable business plans, but let's just say I'm a Skype skeptic. For now, I'm not on the same page as the VCs that pumped US$18.8-million into Skype earlier this year. Until Skype proves otherwise, it will likely become a telecom version of Kazaa - popular but economically unviable.

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• Is Skype Becoming a Business?
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Nortel: The Beat Goes On

So Nortel paid its senior executives cash bonuses in January even though its books were being examined by its indepedent audit committee. You have to wonder if the company's senior management had any clear about how far they had wondered off the track. This was a company just starting to get back on its feet in a market that, at best, will show single-digit growth this year, and Nortel feels cocky enough to reward its senior managers with cash. Why not keep the restricted stocks units pure equity vehicles? The more this story unfolds, the more difficult it is not to be convinced there was a giant Ponzi scheme going on. Perhaps the people at the core of it never thought they would be caught. For Nortel, the worse it probably yet to come as criminal charges are laid and the class-action lawsuits pile up. William Owens may live to regret the day he agreed to replace Frank Dunn as CEO.

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Cool VOIP technology

For anyone who's read this blog, one of my hobby-horses about residential VOIP is the need for it to become more user-friendly. Right now, it's mostly the domain of tech-savvy pioneers who live in single-phone households. That said, it always find it interesting to stumble across companies with technology to make VOIP easier to use. One of them is I2 Telecom, which has started to offer a VOIP service in the U.S. that lets its customers make calls by plugging into a high-speed DSL or cable modem, or a conventional circuit-switch line. I don't know enough about the technology tell you about the quality of calls made over the POTS but it is a neat trick if I2 can pull it off successfully.

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Nortel: Now the fun begins

With the Attorney General in Dallas asking Nortel for all kinds of documents, Nortel's accounting troubles look like they are headed toward the criminal arena. Can anyone say fraud? It is impossible to tell who the authorities have targeted but you have to believe that no one is going to go down by themselves. Once the Attorney General hones in on someone, you can bet they will squeal like a pig and give up a whole mess of people - most likely finance types who helped goose Nortel's results over the past couple of years. There is speculation the Attorney General was encouraged to move into action by the SEC, which is conducting its own investigation. In this age of corporate governance and Sarbanes-Oxley, the SEC clearly wants to come down hard on any company or executives that breach the rules. This story, my friend, is about to become really hot!

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Telus-Microcell: An Unholy Union?

Just when you thought Telus was about to make a hostile bid for Allstream Inc., it catches many people off-guard with a $1.1 billion deal for Microcell Telecommunications. The deal doesn't make much sense from a technological basis because Telus uses different wireless technology - CDMA - than Microcell - GSM. So, it's not like Telus can easily migrate Telus' customers over to its network to improve operating efficiency. This has to be seen as a defensive move because if Telus did not move first, there was a risk Rogers Wireless or Manitoba Telecom Services would launch a bid for Microcell. Rogers appears to be the most likely suitor because it also uses the GSM platform. There are plenty of questions surrounding this deal: is Telus willing to pay too much for Microcell, how is it going to address the two disparate technical platforms, and will Rogers step into the fray. At the very least, this is a bad deal for consumers who will have less choice. Microcell was seen as the one “unreasonable” player in the market that kept everyone else honest on prices. Given how Bell, Telus and Rogers have all adopted the mantra of higher ARPU and bottom-line profits, Microcell's elimination will likely mean one thing: higher prices.

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Nortel Comes Out of Hiding

Nortel finally unveiled its highly-secretive Neptune router yesterday - and even invited the media to its facilities in suburban Ottawa. You would think with this kind of hoopla for a new product, the company would have some of its senior executives on hand to provide a little Carol Merrill-like presentation skills. Nope. Newly-appointed CEO Williams Owens or CTO Greg Mumford were nowhere to found - leaving David Hudson, Nortel's vice-president of data product strategy, (whoz dat?) to host the event. Since taking over as CEO two weeks ago, Owens has yet to talk with the media - although he is replacing Frank Dunn as a speaker at a star-studded telecom conference next month in Toronto.

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Is Entwistle telling the truth?

On a recent conference call with analysts, Telus CEO Darren Entwistle reiterated the position his company's interest in Allstream Inc. is not “on the radar screen”. With Allstream's shareholders scheduled to vote this week on the company's acquisition by Manitoba Telecom Services, Entwistle's comments seem to rule out the possibility Telus will make a last-minute, bid for Allstream. Telus' reluctance to get involved makes sense because its balance sheet is just beginning to look healthy again after shedding nearly $3 billion of debt. Telus also has several strategic challenges such as reaching a new collective agreement with its unionized employees, improving operations in Ontario and Quebec, and addressing the looming threat of Internet telephony. Then again, Allstream does look impressive with its roster of large corporate customers and $3-billion of tax-loss carry forwards. One school of thought is Entwistle is content to let the Allstream-MTS marriage be consummated. Then, when the honeymoon is over, he will seek approval from the Telus board to make a move MTS. This is a gamble because MTS shares could climb if the Allstream starts to generate good results. The last time Entwistle bet on the price of stock going down was after Allstream came out bankruptcy protection. He - along with pretty much everyone else - had to be surprised when Allstream shares went from $30 to more than $70 - eliminating Telus' hope to pick up Allstream at a bargain-basement price.

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Call-Net's cautious approach to VOIP

If you listen to Call-Net Enterprise CEO Bill Linton, the emergence of Internet telephony may not be as rapid as many people believe. In announcing plans to roll out a VOIP service later this year, Mr. Linton said he does not think it will been seen as a replacement for the company's traditional circuit-switch offering. Mr. Linton makes a point that few in the VOIP world want to acknowledge - despite the fact VOIP technology works, consumer adoption will be slow until it becomes more user-friendly. As it stands now, consumers moving to VOIP are tech-savvy pioneers, rather than multi-phone households. The real noise in the VOIP market is how incumbent carriers are hoping to reduce costs by migrating voice, video and data traffic to IP networks. In the corporate market, VOIP is being used for many of the same reasons. This explains why Mitel Networks Corp. was easily able to raise $20-million from EdgeStone Capital Partners earlier this week, while converting $50 million of debt into equity - some which came from telecom entrepreneur Terry Matthews.

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VOIP in Canada

It seems the New York Times has discovered that VOIP is alive and well in Canada. In an article today, the paper's Canadian business corresponent Bernard Simon talks about how Canada's incumbent carriers are facing a “serious threat to their long-entrenched dominance”. At best, this assessment is overly optimistic when you consider that Internet telephony players such as Vonage and Primus are just starting to offer the service to consumers. A more accurate take is that the Internet is allowing new competitors to enter the market without having to make massive infrastructure investments. This environment compares with the late-1990s when competitive carriers such as Norigen and OCI Communications took a stab at taking on Bell Canada - only to fail miserably after spending hundreds of millions of dollars. Before VOIP takes off in Canada, there needs to be regulatory changes that has kept the price of local service at low levels. VOIP also needs to become more user-friendly so that its installation in a multi-phone household can be plug and play.
For some current (March to July 2005) postings on VOIP in Canada, check out the following:
- Outlook for the Canadian VOIP market (Seaboard Group, Aug. 2005)
- Canada Regulates VOIP
- Canada’s VOIP Pricing Landscape
- Bell Canada Unveils VOIP Service
- Rogers launches VOIP service

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