After dropping its funding for long-haul carrier Teleglobe Inc., Bell Canada Enterprises (BCE) Inc. has shown every indication that its plan to become a global entity is solidly on the back burner, according to industry observers.
“From the larger picture of expanding internationally, I would suspect that in the short term it’s pretty much dead,” said Mark Quigley, an analyst with The Yankee Group in Canada in Kanata, Ont. “This is going to be a time (for BCE) to look at core business – investigate things in a Canadian context.”
Quigley figures BCE will explore more homegrown opportunities now that it has stopped funding Teleglobe.
“They have a significant bet on success in Western Canada. Right now the opportunity to grow revenues in Alberta and B.C. certainly exceed the opportunity internationally. From a business point of view, it makes more sense to explore those operations more fully than it does to look outside of the (Canadian) borders.”
That would represent a marked contrast from the company’s previous view. Back in 2000, BCE was all about making a name for itself on the world stage. The company bought Teleglobe to help turn that dream into reality.
But after a rocky two-year-long relationship with its worldly partner – Teleglobe relied on BCE financing and revenue from subsidiary Bell Canada for survival – BCE stopped funding Teleglobe in April.
BCE could not be reached for comment before press time.
Brownlee Thomas, a Montreal-based telecom analyst with Giga Information Group Inc., said BCE’s play for worldwide recognition ended when its chairman and CEO Jean Monty stepped down earlier this year.
“Monty had a vision and that vision was global. BCE has a vision and as a holding company that vision is monetary, payback, business model.…You’re not engaged in high risk.”
Lawrence Surtees, industry watcher with IDC Canada Ltd. in Toronto, said BCE bought Teleglobe to satisfy a jaded view of the industry: Monty figured that only the world’s largest telecom companies would survive the coming years.
“There may be some merit to that,” Surtees said. Citing a partnership between Canadian carrier Telus Corp. and U.S.-based Verizon Communications as an example, he added, “There’s definitely an accelerated move towards consolidation in the telecom market.”
BCE’s trouble with another subsidiary, Bell Canada International (BCI) Inc., suggests that BCE is losing ground in the global space, Surtees said. BCI operates mobile phone networks in Brazil and has performed so poorly that it faced delisting on the Nasdaq market last month.
Thomas didn’t rule out a BCE return to the global hope down the road – although the firm’s idea of “global” might be less expansive than Monty’s was. Thomas pointed out that Canadians spent 7.22 billion minutes calling people in other countries in 2000, but a whopping 5.48 billion (almost 80 per cent) of those minutes went to the U.S.
“If [BCE] says international is the U.S., does it matter? Does [BCE] need to be global? The point is, [BCE] will pay attention to international to the extent that there is money to be made from it.”
Quigley agreed that BCE might return to its global vision in the future, but only after the company has tapped opportunities in Canada.
“Anything they do internationally going forward is going to be under a microscope,” he said. “I suspect they will approach it much differently. Perhaps that would mean a series of active partnerships or joint ventures, rather than taking the plunge into a venture (like Teleglobe).”
BCE in May said it would provision international carriage for Bell customers from AT&T Corp., Equant and Sprint Communications Co. should Teleglobe cease operating. The Ontario Superior Court of Justice last month granted Teleglobe protection from Canadian creditors, but the Delaware Bankruptcy Court denied the company similar protection from U.S. creditors.
“I suspect that BCE has been operating under the assumption that the worst was going to happen,” Quigley said about the company’s back-up plan with other international carriers. “I’m guessing they had been in active negotiations with companies to pick up that traffic should the worst happen, so they had all their bases covered.”
As for Teleglobe, Surtees said observers should not rule out a phoenix-like return for this transcontinental carrier. Even as the company faces bankruptcy and serious reorganization challenges, “a core part of Teleglobe may rise from the ashes,” he said, “and it may still be