In posting its third-quarter results yesterday, Rogers Communications said it had cable telephony
revenue of C$700K and operating costs of C$9.1 million. Rogers said is
adding 10,000 customers/month and has an installation capacity, which
includes a truck roll, of 500/day. Earlier this month, the company said
it had 18,100 phone customers as of Sept. 30. There are signs -
direction marketing – Rogers is starting to ramp up its efforts to get
existing customers to use its phone service. The problem, however, is
Rogers is still not competing on price, and the cost difference between
its offer and Bell's prices is not enough to make it worth the hassle
for many consumers.
Cisco's Giancarlo on Industry Consolidation
I had a chat yesterday with Cisco chief development officer Charlie Giancarlo,
who talked about a variety of topics, including the recent unveiling of
technology to link emergency services radios in a more cost-efficient
way. With the $2-billion Ericsson-Marconi
deal unveiled earlier in the day, I asked Giancarlo if this is an
indication of much-needed industry consolidation among the larger
equipment suppliers. Here's what he had to say:
“I don't think it's yet a sign of consolidation. We do need
consolidation in the vendor business but Marconi has not been part of
the tier-one environment. The industry, as you know, especially in the
optical space, is over competetive at the moment. There are very few
players that are profitable – Cisco in one, Juniper is another and
others are only moderately profitable, and there probably needs to be
greater consolidation.”
Given Cisco's modus operandi, do not expect it to be the major industry
consolidator. Instead, it will continue to make small but strategic
acquisitions. If anyone's going to make a big move, look to Alcatel,
Siemens or Nokia. There has been scuttlebutt about Alcatel buying
Lucent and Nokia and Siemens looking at Nortel. I think a Nortel deal is
unlikely – unless it receives a blow-away offer, what with Mike Zafirovski
coming in as CEO next month. The board will likely give him a chance
to execute a turnaround before it thinks of entertaining takeover offers. A good clue of Nortel's plans could be Zafirovski's compensation package,
which includes five million restricted stock units and five million
stock options. This suggests he needs some time to improve operations
so Nortel's stock can rebound and make his package even more lucrative.
Find-o-Matic?
I wrote a column in the National Post (unfortunately, it's buried
behind our walled garden) earlier this week looking at technology to
address every day problems. One of my examples is using RFID technology
to create a product to easily find lost keys and wallets. The idea is
you an RFID chip on your keys and in your wallet, and when they're
lost, you locate them by using a Find-o-Matic device that generates
some of signal. I got plenty of feedback from people who love the idea.
The question is whether something already exists. Is there a product
out there that can do the job?
Bell Moves into the Montreal VOIP Market
Bell Canada, which has watched Videotron lure away more than 100K local
phone customers in Quebec since Februray, finally made a move to stem
the cable telephony tide. Bell will sell its VoIP service – Bell
Digital Voice – for $35 a month with all the regular bells and
whistles, excluding LD. For an additional $5, customers can get 1,200
minutes LD calling within Quebec. The service is being launched a few
days after Bell won approval from the CRTC to offer different prices in
Quebec than Ontario to deal with different market conditions – i.e.
Videotron is killing Bell with low prices (as low as $15.95 a month)
while Rogers and Cogeco are being far less aggressive in Ontario.
Quebec consumers will pay $5 a month less than their counterparts in
Ontario. It's left to be seen how effective Bell's offer will be given
Videotron's service will still be less expensive. At the very least, it
should stop existing Bell customers, who want VoIP, to jump over to
Videotron.
Nortel Sells Corporate HQ
In a much-speculated move, Nortel is selling its corporate HQ
in suburban Toronto to Rogers for C$100-million. You wonder if
this will change where new CEO Mike Zafirovski will live given he said
he planned to move to Toronto next summer – that is if Motorola and
Mike Z. can work out a deal over that troublesome two-year non-compete
clause Mike Z. signed in January in return for a $16.8-million
severance package. In one sense, Nortel dumping its headquarters is
another sad chapter in the company's death by a thousand cuts. The 1M
square foot facilty used to be a switch manufacturing plant before
Nortel spent $46-million to renovate it in the mid-1990s. In its
heyday, it was a corporate crown jewel
with restaurants, a bank, fitness facility, a Zen garden stone with
benches and a Japanese maple tree, and a serenity loft (apparently,
people were working 7/24 at the height of the telecom boom so they
needed all kinds of amenities). In recent years, however, the
headquarters has lost its relevance/importance north of the
border to Nortel's R&D facilities
in Ottawa, as well as U.S. operations in Raleigh, N.C. and Richardson,
Tex. On the other hand, having a
headquarters literally in the middle of nowhere only 30 minutes from downtown Toronto and a short drive from the airport that isn't close to
customers or R&D facilities, makes little sense is not that bad, I guess. I wonder how
Rogers' employees will feel about moving to Brampton, particularly
those who used to work before Call-Net before it was acquired by Rogers
earlier this year. If they are the ones moving to Brampton, it could
make a very long commute.
Update: Here's the story I wrote in the National Post
on the sale of the HQ, looking at how it symbolizes Rogers'
transformation into a telecom player from its roots in the cable
industry.
Consolidation in the Telecom Equipment Market?
Is the telecom equipment market finally poised to consolidate? Maybe
it's about to happen amid a report in the Wall St. Journal
that
Ericsson plans to acquire Marconi's networking equipment business for
$2.1 billion. Mind you, this
will be a small dent in the supply side of the telecom market that has
become increasingly competitive and margin-thin with the rise of
low-cost Chinese
suppliers (and possibly Indian players in the future as the market
develops and suppliers such as Nortel and Nokia establish local
manufacturing operations through partnerships and joint ventures.) As Om Malik quickly pointed out earlier today, Marconi's future became unclear earlier this year
when it failed to win any of BT's $19 billion next-generation network
contract – a huge blow given Marconi was a key supplier to BT. Given
Ericsson's focus on the wireless business in recent years, it will be
interesting to see how the acquisition of the Marconi business fits
into Ericsson's strategic plans. And while Marconi sort of being taken out of the market is interesting, the
real action will be quasi-tier one targets such as Lucent and Nortel.
Lucent is
clearly the more obvious candidate (Alcatel?) given it doesn't have any
of the accounting, financial and management woes of Nortel. Then again,
there have been plenty of rumors about Siemens and Nokia sniffing at
Nortel so maybe the Ericsson strategic thrust will encourage/inspire
other big moves.
