Another day, another M&A deal in the rapidly consolidating software industry. This time, Fimalac SA has acquired Toronto-based Algorithmics for US$175-million. Algorithmics is one of the leading suppliers of risk management software to financial institutions. It will be interesting to see how must Algorithmics' investors get back given the company has raised US$85-million since 2000. This week alone has seen PeopleSoft, Veritas and Algorithmics snapped for more than US$28-billion. As software makers prepare for a return in corporate spending, look for more acquisitions as the bigger players looking to fill holes in their product portfolios.
Videotron Ltee. is expected to jump into the Internet telephony market soon, which would make it the first Canadian cable company to offer the fast-emerging service.
According to analysts who attended briefing sessions with Videotron senior management yesterday in Toronto, the Montreal-based company will roll out a residential primary line service with eight hours of back-up power, access to 911, the ability to keep your existing phone number, as well as features such as 411, 611, voice-mail, call-waiting and call-display.
There is strong speculation Videotron, the country's third-largest cable company, with 1.45 million customers, could launch its service as early as Jan. 1. This will put the company into the telephony market ahead of peers like Rogers Communications Inc. and Shaw Communications Inc., which plan to unveil telephony service by the middle of next year.
Videotron said it expects to spend $80-million over the next four years on fixed capital costs to support its telephony plans. It estimates the average acquisition cost per customer will be $250. The company, which will offer telephony as part of a bundle, has been conducting trials with 2,000 customers in Montreal.
Eamon Hoey, a senior partner with Hoey Associates, said Videotron did not disclose its launch date or pricing strategy but he said it does not make much sense for a company to hold analyst briefings a week before Christmas to discuss a product to be launched several months down the road.
He believes Videotron will pose a more dangerous threat to Bell Canada than Internet telephony players such as Vonage Holdings Corp., Comwave Telecom Inc. and Primus Canada Telecommunications Inc. because Videotron has a stronger brand name.
“Consumers in Quebec have a strong belief in Bell, and it has been much more difficult for competitors to penetrate [the market], even in long-distance,” Mr. Hoey said. “People in Quebec believe bigger is better so you need a big company that consumers believe in, the same way they believe in Bell.”
Videotron, which has 500,000 Internet access customers, aims to differentiate itself from Vonage, Primus, and others by playing up its 15-year track record in the telephony business.
Its Videotron Telecom subsidiary operates a 11,000-kilometre broadband fibre-optic network in Quebec and Ontario, and offers services to business customers.
“Videotron is well positioned for the future of residential telephony using VoIP,” the company said in an executive summary given to analysts. “It has a solid, reliable and saleable network, and delivers carrier class quality of service.”
Not to kick a dog when it's down but you have to love Nortel's ability to
turn a positive into a negatiive. Exhibit A is a US$500 million contract
Nortel announced earlier this week with an Indian wireless carrier. Turns
out – according to National Bank Financial analyst Tom Astle – Nortel could
lose as much as US$150 million on the deal. Apparently, that is the price of
admission to get a foothold in the Indian market these days. I guess the
idea is that you lose now but win later when customers come back for more
goodies – kind of like a retailer offering a loss-leader in the hope a
consumer buys some other premium price products. Nortel's willingness to
strike a money-losing deal shows the lengths that suppliers need to go these
days to win business in an industry with low single-digit growth. What you
may discover is while sales stay steady, profits will shrink unless you can
migrate your product mix to services and software. In many ways, Nortel is
looking much like Ericsson these days with its heavy reliance on wireless.
If that market starts to slow, watch out 'cause Nortel will have more to
worry about than cooked books.
Sent from my BlackBerry Wireless Handheld
Videotron Ltee's telecom division, the company has more than 1,000 customers testing its Internet telephony service in Montreal. “The tests are very conclusive (+++), and Videotron with Videotron Telecom are currently poisitioned to become the first major telco to provide IP TEL over a high speed internet network in Canada,” a Videotron Telecom executive wrote in a recent e-mail after AOL Canada received plenty of media attention about its new TotalTalk telephony service.
Videotron may be getting close to its Internet telephony if a meeting today with analysts in Toronto is any indication. Rogers has set its VOIP launch date for July 1, 2005 while Shaw Communications will likely go live in the first quarter of next year.
Bell's move into the television business will take a major step forward next year when it start trials of an Internet-based service aimed at single-family households. During an investment conference today in Toronto, the company came across as ultra-confident as it gets ready to go mano-a-mano against the cablecos. At the heart of Bell's TV strategy is a $1.2-billion investment over the next four years to upgrade it high-speed Internet network in Ontario and Quebec. This will boost the network's speed to 26Mbps. When asked if this is a big enough pipe, BCE executive Eugene Roman said 26Mbps will let Bell deliver one high-definition channel, two standard television channels, high-speed Internet and telephony. He said a high-definition channel can be delivered using 8Mbps of capacity, and it will only shrink as compression technology improves.
Another interesting discussion is Bell's decision to pursue the less expensive fiber to the node (FTTN) strategy rather than following Verizon, et al down the fiber to the home (FTTH). BCE CEO Michael Sabia FTTH makes no economic sense and his company can do everything they need strategically with FTTN. Still, Bell is going to spend nearly $700-million to execute its TV strategy.
Bell Mobility is jumping at the 3G bandwagon with a $150 million plans to upgrade its 1X wireless network to EVDO. Canada's second-largest wireless carrier has 21 EVDO sites up and running now, and hopes to roll out EVDO across the country by 2006. Bell claims it will be offer regular speeds of 600 to 800kps, which is five to seven times faster than 1X. Bell has little choice but to spend aggressively if it wants to generate more revenue from data wireless services, which carry higher margins than voice. Laugh if you want at ring tones, screen savers, games, etc. but that's where the real money in wireless will be found. Bell also plans to launch a push-to-talk product in the first quarter, which it says will “end the push to talk monopoly” enjoyed by Telus Corp.'s MIKE service. Bell Mobility CEO Michael Neumann says Bell's push-to-talk service will lure MIKE users away from Telus with enhanced features, although he wouldn't spills the beans on what they might be. He also mentioned Bell has no plans in the short to medium term to expand its wholesale strategy, which will see Virgin come into the market early next year (maybe?) through a joint venture with Bell. Speaking of the youth market, look for Bell to re-introduce its SOLO brand to go after the teen set. This begs the question why do a deal with Virgin if you have your own youth strategy?