If anyone can track down Telus CEO Darren Entwistle, don't be surprised if he looks like the cat who swallowed the canary. With Rogers Communications boldly stepping up to the plate to acquire Microcell Telecommunications for $1.4-billion, Telus gets what it really wanted: consolidation within the wireless industry without more debt on its balance sheet. It's really the best of both worlds for Telus, which has slowly been winning back investor confidence for the past four years since spending nearly $7-billion to purchase Clearnet Communications. While Telus may feign disappointment in seeing its $29-a-share bid trumped by Rogers' $35 offer, you have to wonder if Telus forced Rogers into the arms of Microcell by making what could easily described as a half-hearted offer for Microcell. The obvious question is whether Telus really wanted Microcell? After all, Telus would have been forced to take on more debt; the cultural/corporate integration challenges would have been enormous; and the technical issues (Telus uses CDMA, Microcell uses GSM) would have be expensive and a complex headache. Entwistle can look at what happened today as a minor victory. With only three national players, the pricing environment should – in theory – improve, allowing each carrier to improve average revenue per user (ARPU). The wildcard could be Virgin Canada, the joint venture between Richard Branson's Virgin Mobile and Bell Canada. If Rogers moves Microcell out of the pre-paid market or struggles to integrate its operations, the huge window of opportunity could open for Virgin. Of course, this is something that will happen down the road. In the meantime, I suspect champagne is being toasted in Toronto (Rogers), Montreal (Microcell) and Vancouver (Telus).

Over the weekend, the Globe & Mail's business section ran a story about Research in Motion reaching a crucial strategic crossroad. The thesis, which is far from new, is that while RIM has enjoyed tremendous success and attracted nearly two million users, it is vulnerable to competitive threats from hardware makers such as Nokia and Samsung, and software developers such as Microsoft. This is legitimate argument given Canada's track record in the high-tech hardware sector is less than stellar, but it unfortunately ignores a key element: RIM's growing and powerful cache as the device for mobile e-mail. Say what you want about the Treo 600, or devices made by Danger Technology, Good Technology and Nokia, the RIM Blackberry is a category monster. Until someone comes up with a much better mousetrap, RIM will continue to be the dominant player. What RIM has managed to become is the default for people looking for on-the-go e-mail. This much-coveted but difficult to attain status is similar to what Apple has with the iPod in the MP3 player space, what eBay has achieved in the online auction space, and what Google has in the online search market. When a company is seen as not only the market leader but the market, it becomes very difficult for rivals to knock it off. Over the years, there have been a flurry of “the sky is falling” stories about RIM but the Waterloo, Ont.-based company continues to roll along. It wasn't that long ago that big, bad Motorola was going to roll over RIM, but where is Motorola these days in the mobile e-mail market? Nokia was also going to be a major treat but has, instead, licensed RIM's software after its original N-Gage product bombed out. Nokia should really focus on making sure its wireless phones are as cool as those made by Samsung and LG before it worries about developing a RIM-killer. Clearly, RIM realizes there is competition on the horizon. Its new 7100T pro-sumer device, which looks more like a phone than a Blackberry, is a positive step and an important strategic foray. For corporate executives who want mobile e-mail, the Blackberry will remain the device of choice. For the rest of us (who have to pay for wireless service each month), the 7100T will be an intriguing choice because it's a phone that also happens to deliver e-mail capability. Instead of people worrying about RIM being caught, perhaps they should be more concern that RIM is hot on the heels of Nokia, Samsung, Motorola and LG.

In the past five months (sincel CEO Frank Dunn and CFO Doug Beatty were fired), Nortel has been trying to restore its credibility. Bringing in ex-U.S. Admiral Bill Owens was seen as a necessary move in this direction despite his lack of private sector experience and success. Unfortunately, the company just can't seem to do the right thing. Just when you think they're getting back on the beam, something happens that causes the credibility process to start all over again. The latest “incident” is Nortel's disclosure in an Ontario Securities Commission filing that third-quarter sales will be lower than expected. Instead of US$2.6-billion in third-quarter revenue, Nortel now expects something around US$2.3-billion. Sales for 2004 could hit US$10.3-billion, compared with the US$10.65-billion Thomson First Call concensus. Nortel has either adopted more restrictive accounting practices; the market has taken an unexpected late-summer dive; or the company's senior executives/market analysts have little clue what's going on. It harkens back to early-2001 when ex-CEO John Roth bullishly predicted Nortel's sales would climb to US$40-billion. When the bottom fell out of the market, he expressed complete shock. While yesterday's news is not as shocking, coming out with a lower than expected sales forecast was the last thing Owens or Nortel needed right now. If you're an investor, this is becoming an increasingly difficult company to believe. How can you purchase stock when management doesn't appear to have his hand firmly on the tiller. For another interesting take on Nortel's recent troubles, check out the Motley Fool's Bill Mann.

As Nortel Networks CEO Bill Owens continues to tell investors and analysts the company – among other things – can be competitive with Asian rivals and emerge from its troubling accounting scandals, it is important to remember the realities of the market – things are are extremely tough out there for most suppliers. Nortel came clean with its struggles today when it said third-quarter sales will be lower than the second-quarter. The company is now looking for a single-digit revenue increase this year, while the overall market will grow faster than that – suggesting Nortel could be losing market share. Another telecom maker having its troubles is Ciena Corp. In a recent interview with Reuters, Ciena CEO Gary Smith said he does not expect to see a recovery any time soon.”Our assumption is that the market will continue to be turbulent,” he said. This is pretty blunt talk from a CEO who needs to reassure investors of his company's prospects. Even more evidence of the telecom industry's struggles came from Celestica Inc., which saw its stock pounded after disclosing that third-quarter revenue will be US$200-million to US$205-million below expectations. Celestica's customers include Cisco, Lucent and HP – making it an industry bellweather of sorts. Even sales in the much-hyped Internet telephony market have been less than impressive. According to consulting firm Dell'Oro, second-quarter sales of equipment such as softswitches and media gateways climbed just 3% from the first quarter.
So what's happening out there? It appears many carriers continue have continued to adopt a cautious approach to spending. At the same time, prices are under attack as low-cost suppliers such as China's Huawei battle for market share. More and more, the telecom equipment market looks like a sector in dire need of consolidation. Perhaps it won't be on the scale of Cisco buying Nortel, but there are too many players fighting for a shrinking piece of the pie.
Amid this environment, Nortel and Mr. Owens are waging an aggressive public relations campaign to win back the affections of investors, analysts, customers and suppliers. The company is attempting to spin a story of restitution, stability and confidence – and who better to deliver it than a former U.S. Admiral? The problem, however, is while Nortel attempts to make structural and strategic changes, the market is scuffling and shifting. If Nortel can't generate sales momentum, all of its PR efforts will be for naught.

In the wake of the rave reviews for Research in Motion's new 7100T wireless device, some sober thought is being given about its potential impact with consumers. The 7100T is RIM's boldest move to produce more of a telephone-like product, and a real move away from its e-mail-centric Blackberry product. The tech world is excited about the size and shape of the 7100T and – most important – its consumer-friendly US$200 price tag. That said, analysts are now pointing at the 7100T's weaknesses. In particular, there are issues about user frustration with RIM's innovative keyboard, which uses predictive technology to help create words. UBS analyst Michael Urlocker is also concerned about the lack of a digital camera and a flip phone feature, and the relatively short battery life. Granted, this is RIM's first crack at making a telephone, and it's an impressive first move. You would expect a smart company like RIM to address many of the analysts' concerns with its next-generation product.

Now that Rogers Communications Inc. has spent nearly $2-billion to acquire AT&T Corp.'s 34% stake in Rogers Wireless Inc., where does that leave Microcell Telecommunications. It now seems rather unlikely Rogers would make a run at Microcell, which has been sitting in limbo since Telus made a $29-a-share bid for it earlier this year. Rogers likely doesn't have the financial appetite to spend $1.5 billion or so for Microcell, even though a deal makes some sense given they use similar technologies, and consolidation in the wireless industry would be healthy for Rogers, Telus and Bell. As Microcell, Canada's fourth largest wireless carrier, tries to carve out a viable business, it has been desperately trying a variety of marketing tactics to retain and attract customers – the latest being unlimited incoming calls. As this happens, questions are starting to be raised by analysts about whther Microcell's churn rate is significantly higher than what the compoany admits. Microcell appears to be waiting for two scenarios to materialize: its business gains momentum as some of its marketing tactics resonate in the market; or it waits until another suitor (Rogers, Craig McCaw?) come to the rescue. At any rate, the Rogers-AT&T deal should not be last major news of the year.