Mark Evans

CRTC Comes to Call-Net's Rescue

How much do you want to bet Call-Net Enterprises shares jump tomorrow after the CRTC finally - two and a half years to be exact - made a decision about competitive digital network services. The decision is complex and only of interest to senior telecom executives and regulatory bureaucrats but it means Call-Net will get a reduction of $25-million on what it pays incumbent carriers such as Bell and Telus to use their services and facilities. Now, $25 million may not appear to be much money but it's significant considering Call-Net had operating income of $73-million for the first nine months of 2004.
The CRTC's decision is interesting because it attempts to strike a balance between meeting the needs of competitors who need access to facilities but do not have the money or appetite to build them; and the CRTC's mandate to support carriers who operate their own facilities.
The reaction among carriers is telling: Call-Net is “thrilled” because its carrier costs will decline; Manitoba Telecom is frustrated because the CRTC didn't take into account next-generation services, while Telus and Bell say they are satisfied, which means they are secretly overjoyed.
The bottom line is investors will look at Call-Net shares, which closed at $3.85 yesterday in Toronto, and bid it up. Greg MacDonald, an analyst with National Bank Financial, has a 12-month target price of more than $7 on Call-Net. It may be days or weeks before it gets there.