Telecom: BCE chief warns Ottawa to tread carefully on foreign-ownership reforms

By Jamie Sturgeon | National Post - CBC.ca | May 18, 2010

George Cope, chief executive of BCE Inc., cautioned yesterday that government should carefully weigh a decision to change or scrap foreign-ownership restrictions in the telecommunications sector, an area of the economy he says is already flush with investment.

This follows comments last week from Industry Minister Tony Clement further suggesting Ottawa is moving toward a policy shift to promote competition.

At a lunch speech in Toronto, the CEO of the country’s largest communications company said the Canadian market has become highly competitive in the two years since he took over, forcing BCE’s Bell Canada to pump $6-billion into new wireless and wireline upgrades through 2010 to stay ahead.

He pointed to Bell’s new, multibillion-dollar 3G+ wireless network jointly built with rival Telus Corp. as an example of how domestic needs are being met, and warned that allowing in firms from the U.S. and elsewhere may hinder future advancements.

“Do you think Summerside, P.E.I., would come up before Chicago? Not going to happen,” he said. “It happened in this case. So let’s be very, very careful about what we’re trying to solve in Canadian telecom rules because the investment is actually working.”

The network blankets 93% of the country.

Mr. Clement told a special parliamentary committee last week that restrictions could be lifted on the telecom sector by allowing key content assets owned by the biggest providers like Bell and Rogers Communications Inc. to remain in Canadian hands, while opening up distribution and network assets to foreign ownership.

The comments follow a pledge in the Throne Speech in March to liberalize the sector. “Our government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need,” Gov. Gen. Michaëlle Jean said at the time.

Ottawa’s move stems from two federal blue-ribbon reports completed in 2006 and 2008, that call for a relaxing of the rules as a way to spur more investment in economically important communications service.

This year however has seen three new entrants into the wireless market, in Wind Mobile, Mobilicity and Public Mobile, with cable giants Videotron Ltee. and Shaw Communications Inc. are on their way with wireless in Quebec and Western Canada.

Competition in broadband is also heating up as Bell and Telus Corp. invest billions this year overlaying copper networks with fibre, bringing alternatives to rival services provided by Rogers and Shaw. “What problems are we trying to solve, what’s the objective?” Mr. Cope said.

Still, the industry, especially in wireless, remains dominated by Bell, Rogers and Telus.

Some analysts suggest that without consolidation or access to more foreign capital (through a change in policy), the young startups face near-certain failure and a retrenchment in services in the market.

jasturgeon@nationalpost.com

Telecom: Wireless leads way as Bell keeps getting better

By J. Sturgeon | National Post | May 6, 2010

TORONTO -- As BCE Inc.'s marketing slogan suggests, it just keeps getting better.

The Montreal-based telecommunications giant reported a 61% rise in profit for the first quarter Thursday in the clearest sign yet that its "five strategic imperatives" campaign is yielding positive results. But perhaps most impressive, Bell, whose ad pitch is that "Today just got better," is sustaining healthy growth in its wireless business when many say the market is ripe for a slowdown.

Bell Canada, the operating entity of BCE, added an industry-best 55,625 new wireless customers during the period, helping the firm to better-than-expected financial results.

A big reason: Bell ballooned its retail presence by 750 stores in January when it began selling services through The Source, the consumer-electronics retail chain it acquired last year. The move delivered a one-two punch to competitor Rogers Communications Inc., which had been selling its phones through the chain until then.

Another reason was the ubiquitous marketing presence Bell held across the country in February. As the premier sponsor of the Vancouver Games, hardly an event went by without some reference to the Montreal-based company.

"No doubt there had to be some benefit from the Olympics," added George Cope, chief executive, on a morning call with analysts. "The addition of the The Source as a new distribution channel and significant Winter Olympics advertising" likely helped BCE gain customers, Jeff Fan, Scotia Capital analyst said.

Bell has been looking to gain wireless share to offset declines in its traditional phone service, making it a top priority among its so-called "five strategic imperatives." Bell is the second-largest wireless carrier in the country with about 30% of the market, just ahead of Telus. Rogers is the market leader controlling about 37% of the market.

The assault was stepped up late last year when the company hit the switch on a new multibillion-dollar HSPA network, breaking Rogers' exclusive hold on the immensely popular iPhone. The move provided a company record 163,000 rise in net new wireless additions in the fourth quarter. Since taking over two years ago, Mr. Cope has moved aggressively on five fronts -- improving customer service; accelerating wireless sales; using its legacy wireline presence to advantage; while investing in broadband and cutting out costs. There was "clear progress" on all five in the quarter, the CEO said.

But competitive headwinds are gathering -- the very forces that the initiatives are broadly designed to counter: greater competition amid slower growth across the industry.

This summer, regional cable provider Vidéotron Ltée. will introduce wireless in Quebec, squaring its offerings with Bell's. Meanwhile, three new independent wireless entrants -- WIND Mobile, Mobilicity and Public Mobile -- will compete for customers in key markets.

Of the new threats, perhaps the biggest is posed by Vidéotron. The Quebecor Inc. subsidiary plans to wrap cellphones into its existing cable, home-phone and Internet services, and offer all four under a single, discounted bundle. It will be a potent offering that will tempt wireless customers from all three major carriers to switch, analysts say.

But it could be particularly painful for Bell, which counts Quebec as one of its most important markets. Here too, though, the five-point plan is at work. Bell invested $431-million last quarter in pushing fibre deeper into neighborhoods and in some cases, directly to the home.

All told, Bell is spending a good portion of $2.55-billion on replacing copper with fibre in core markets. Importantly, the upgrades will support an IP version of Bell TV, a product designed to thwart cable products from Videotron and Rogers.

"Wireline continues to exhibit an organic decline. However, BCE is undertaking investment to stem overall customer losses by focusing on IPTV, which could bring back some needed revenue growth," said Maher Yaghi, analyst a Desjardins Securities.

For the quarter ended March 31, BCE said it earned 65 cents a share, compared with 57 cents in the same period a year ago. Analysts expected earnings per share of 63 cents.

Financial Post

jasturgeon@nationalpost.com