Media: Great on paper, iPad not ready to save printed word yet

By J. Sturgeon | Financial Post | 01. 30. 2009

They stole headlines last year and were championed as the saviours of the newspaper, magazine -- in fact, all print media. This year, industry observers say e-readers like the Kindle made by Amazon.com will take off with consumers as we continue to shift reading habits from paper to screens.

Steve Jobs brought things to a fever pitch this week when his Apple Inc. introduced the iPad, a device many said would accelerate and revolutionize that trend. With it would be the return of paid content.

"We're going to stand on [Amazon's] shoulders and go a bit further," the celebrated chief executive said during the introduction of the product: an oversized touchscreen device with the dimensions of a large hardcover book.

Integral to Apple's e-book approach is the creation of iBooks, an application that serves as a storefront for the Cupertino, Calif. firm's new online e-bookstore. It will sit on the iPad's main screen, allowing readers to purchase major titles from the world's biggest publishers, including Penguin and Harper Collins.

Still, if the iPad is to convince readers to pay for digital print products, it struggled to impress veteran media observers.

"It checked off on its to-do list everything that was obvious. Make an e-reader application. Make sure you have a bookstore integrated into it. Use the elegance of the device to create a reading experience and be able to pull books off bookshelves. All of that," said James McQuivey, media technology analyst at Forrester, a U.S. researcher.

"But there is an opportunity missed here to take it to the next level."

In general, the iPad is simply an enlarged version of the iPod Touch with the addition of an e-book application, many analysts said.

For instance, the New York Times, which plans to begin charging for its Web content next year in another attempt to stem falling ad revenues, unveiled a new app for the iPad at the presentation. Yet there is no indication it differs to any great degree from the free one now offered on the iPod Touch through Apple's App Store.

As important, innovation on the social media front -- which could provide a value-added service and thus, be worth paying for -- is lacking from the iPad's e-reader experience. There is no way for users to tell their friends or Twitter followers automatically what they are reading (or buying).

"[Apple] could have demonstrated a much more integrated reading experience," Mr. McQuivey said.

It does not mean it cannot be done later on. But the iPad's saviour status took a tumble in the wake of Mr. Jobs' presentation on Wednesday.

That may not be lost on Apple, which priced the base model at a modest US$499 (16GB). The most expensive model is only US$849 (3G-capable, 64GB), perhaps in recognition that Apple has not reinvented the wheel with the iPad as it did with the iPod in 2001 and the iPhone in 2007, analysts say.

Canadians can get their hands on it in March. But it will be a version strictly made for local Wi-Fi networks. After that, a more expensive "3G" model that can access the Web through a cellphone carrier's wireless network will be introduced, possibly in late spring or early summer --it will be available first only in the U.S. through AT&T.

"Apple was in a position to say, 'Look, we're going to partner with publishers that create apps that are innovations in reading.'" Forrester's Mr. McQuivey said.

It may still be, but the iPad and its army of developers have more work to do yet.

jasturgeon@nationalpost.com

Media: Rogers trims programming, head count at Citytv network

J. Sturgeon | Financial Post - CBC.ca | Jan. 18 2010

Aisling Slattery’s photograph could still be found on Citytv Calgary’s Web site Tuesday afternoon, but her job as the anchor of the station’s noon hour newscast was gone.

Her fate was shared by about 60 other workers across the TV network as its parent, Rogers Communications Inc., eliminated programming while cutting production and on-air jobs at all stations but Winnipeg.

“Today was my last day,” she scrawled on her Twitter home page. “It’s been an absolute honour anchoring the news... I will miss you all very much.”

Rogers, one of the largest media companies in Canada, cut prime time and evening newscasts at Citytv stations in Vancouver, Calgary, Edmonton and Toronto Tuesday, ushering many on-air personalities and longtime broadcasters out the door, as well.

The rationale, a Rogers spokesperson said, was simple economics. Conventional television stations have been bleeding advertising revenue since the recession began in 2008, as advertisers have drastically dialed back their budgets.

Koreen Ott said the telecommunications giant, which is also the country’s biggest cable TV provider alongside Shaw Communications Inc., was forced to cut “underperforming” programs. “It’s about delivering results,” she said.

Citytv’s long-running Breakfast Television and CityLine programs will remain in place; however, the four-hour morning shows in Vancouver, Calgary and Edmonton will shrink to three hours in length, she said.

While the news surely came as a shock to the many camera operators, producers and editors who learned that their jobs were gone Tuesday, it was not to industry analysts.

“What’s surprising is that the cuts came now, not before,” said Kaan Yigit, president of Solutions Research in Toronto. “Global and CTV were not making it up really when they argued that local TV is facing strong financial challenges.”

The Global Television network, owned by Canwest Global Communications Corp. (also the parent of the National Post) and CTV Inc. are the country’s two largest private conventional networks. Both have cut deeply into payrolls and been forced to sell and even close stations as advertising revenues dropped.

The country’s over-the-air stations are also coping with the longer-run migration of viewers away from traditional TV packages and into specialty channels and online sources, leaving advertisers to chase them.

Tuesday, it was Rogers’ turn. “Shifting viewer patterns coupled with the overall state of the economy required the company to rethink its programming lineup,” the firm said in a statement.

The hardest hit was Citytv’s flagship station in Toronto, where 35 personnel were fired, including some senior producers. Most visibly, long-time anchor Anne Mroczkowski, who along with Gord Martineau, had been a cornerstone of that city’s news hour for more than two decades, was let go.

Together, she and Mr. Martineau, who will remain at the station, were the longest serving on-air news team in Canadian television history.

There may be relief coming for the country’s networks. The regulator for the TV industry is expected to come out with a decision sometime before the spring that will address a proposal to compensate TV stations that send out their signals over the air for free.

As a cable operator, Rogers may be on the hook to pay TV networks for their signals if the idea is endorsed by the Canadian Radio-television and Telecommunications Commission. They have protested loudly against the idea.

However, if the CRTC mandates a “fee-for-carriage” regime, Rogers’ TV network, which employs about 1,000, stands to be a beneficiary.

National Post

jasturgeon@nationalpost.com

Telecom: Virgin Mobile boldy moving up market to ward off new threats

By J. Sturgeon | Financial Post | 12.21.2009

Competition will be the watchword for Canada's wireless industry next year, as established players face off against a cast of new entrants poised to steal market share.

While the current operators are talking tough, questioning whether any of the new startups have the right strategy or wherewithal to challenge meaningfully, a shakeup of the entire sector looms.

Nowhere are the crosshairs of the new players trained more closely than on the lower end of the market -- existing cellphone users who merely want inexpensive voice and text-messaging services or Canadians who own no mobile phone because they find current prices prohibitive.

It means the discount or "flanker" brands of Canada's big three wireless firms -- Fido, owned by Rogers Communications Inc., Koodo, owned by Telus Corp., as well as Solo and Virgin Mobile Canada, owned by BCE Inc. -- will face the fiercest competition.

For one of them, the threat is affecting a reinvention, says its president.

"Early next year, we'll be in the first phases of a very different Virgin," said Robert Blumenthal, the head of Virgin Mobile Canada.

What that means is unclear -- Mr. Blumenthal is mum on details. But he did reveal that Virgin will begin selling Apple Inc.'s iPhone.

It is a move, he says, that signifies a transition at Virgin from a discount sibling to BCE's Bell Canada, which fully acquired it this spring, to a full-weight partner, offering a complete suite of services for consumers who are increasingly demanding faster and more sophisticated devices.

"You'll see a great expansion in our portfolio and us being able to offer higher-value devices and services," he said in an interview last week. "Where we had been traditionally lower down in the marketplace, we'll be expanding to realize our true potential."

In the new year, Public Mobile Inc., DAVE Wireless Inc. and Videotron ltee will all launch, joining WIND Mobile, which began offering services last week in Toronto and Calgary. DAVE and Videotron have been quiet on their plans, but Public Mobile has stated repeatedly it will offer cheap, flat-rate voice and text services for perhaps $40 a month across its coverage areas between Windsor, Ont., and southern Quebec -- the most populous region in the country.

Mr. Blumenthal says the threat is overstated, but admits that pricing pressure will be a theme for next year and that Virgin is "considering everything."

One thing is for certain: He wants Virgin to get simple.

As it stands, Virgin offers dozens of prepaid and contract plans, not to mention several "add-on" options. "The easier you can make the decision, the easier to sell, the easier to buy. It helps sales and it helps the consumer make choice," he said.

Virgin Mobile, a subsidiary of the U.K. conglomerate, originally entered Canada four years ago with its celebrity CEO Sir Richard Branson partnering with Bell. The Montreal firm supported Virgin with its network in exchange for shared revenues.

In May, Bell acquired Mr. Branson's half for $143-million while agreeing to continue paying licensing fees. It was then that Mr. Blumenthal, a former Telus executive, joined Virgin.

The division has become a key driver of wireless growth for Bell. Analysts suggest Virgin now occupies as much as 15% of the telecommunication giant's wireless base.

However, if it is to maintain momentum, Mr. Blumenthal says Virgin must leverage Bell's new network upgrade to capture higher-margin smartphone users, which make up the fastest-growing market segment.

"Over time, I have a belief that as more people become wireless users and their wireless usage becomes more of a necessity than a luxury ... people tend to move up."

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Telecom: Mike Z steps down, says Nortel 'stabilizing'

J. Sturgeon | Financial Post | Aug. 11, 2009

In November 2005, he was hired by Nortel Networks Corp. to open a new chapter for the struggling telecommunications firm. Almost four years later, Mike Zafirovski has left Nortel as it moves through what most say is its last.

Monday, Mr. Zafirovski stepped down as chief executive of the bankrupt firm, as did most of Nortel's board of directors.

The decision, which comes as the Toronto-based company is in the process of selling off all of its business operations, was jointly made by Mr. Zafirovski, Nortel's bankruptcy monitor Ernst & Young Inc. and the company's creditor committee.

In an interview, the 55-year-old executive said the decision to go was made because the company, while still losing considerable amounts of money, was "stabilizing" now and that it was in the best interest of all for him and certain board members to step aside.

Nortel's two largest business units have or are on the verge of being acquired by rivals while Nortel is in advanced talks to sell its remaining units. The moves put the company's employees and technological legacy on a secure and "promising path," he said.

The announcement coincided with the release of Nortel's second-quarter results, which showed the company lost US$274-million during Mr. Zafirovski's final three months at the helm, more than double the loss from the same quarter a year ago. Revenue declined 25% to US$1.97-billion.

However, revenue did increase 14% quarter over quarter, indicating some customers are gaining more confidence that the company will honour future contract obligations - or at least whatever company acquires its businesses will.

Mr. Zafirovski said in June that Nortel would sell all its divisions through so-called "stalking horse" auctions as it tries to pay back creditors. The court-supervised sales are designed to set a floor price on the assets and encourage rival bids.

Last month, the company sold its major wireless business, which makes network equipment for mobile-phone carriers, to Sweden's Ericsson for US$1.13-billion. That bid trumped a US$650-million offer from fellow European giant Nokia Siemens Networks. Avaya Inc. has placed an initial US$475-million bid for the Enterprise unit, Nortel's second biggest by revenues, which develops networks for large corporations. An auction is slated for early next month.

"Frankly, we've done a pretty significant job of stabilizing the company, producing good results and increased the interest in our businesses from buyers," Mr. Zafirovski said of Nortel's performance since its bankruptcy filing on Jan. 14.

The 127-year-old company was forced to seek bankruptcy protection after its turnaround plans were sideswiped by the economic downturn last year, Mr. Zafirovski said.

"We were there in the middle of 2008," he said adding that he and other senior managers worked tirelessly to overcome the accounting scandals and related legal woes with investors that had plagued the firm since before his arrival.

He said he expected growth in most of the company's markets last year until the recession hit, leading to double-digit declines in sales across the telecommunications industry.

"We certainly did not have the flexibility to withstand that," he said.

More than a dozen appeals to the federal government made between October and January were rebuffed, Mr. Zafirovski said, as lawmakers were not convinced a bailout would save the firm. "I feel it's something the government should have done," he said. "I understand why it wasn't, but certainly we believe we provided a compelling case."

Alongside Mr. Zafirovski, five directors left the company yesterday. Chairman Harry Pearce as well as John Manley, James Hunt, Richard McCormick and Claude Mongeau stepped down.

Pavi Binning, Nortel's chief restructuring and financial officer will remain to manage operations for the time being. Nortel is also seeking a greater role for Ernst & Young, its court-appointed monitor, in its restructuring activities.

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Telecom: Ericsson poised for supremacy in North America

By J. Sturgeon | Financial Post | Aug. 01, 2009

The sun had set on the Statue of Liberty hours before on Friday, July 24, harkening the arrival of another summer weekend in New York City. Far above the din of the streets, executives from Telefon AB LM Ericsson and Nokia Siemens Networks BV, two of the world's biggest telecommunications firms, remained hard at work.

"We had Nokia Siemens sitting on one side of the table and Ericsson on the other," James Bromley, Nortel Network Corp.'s lead U.S. attorney, told a Delaware court this week. Representatives of the two international tech giants had been huddled since the morning around the U-shaped boardroom table on the 39th-floor offices of Cleary Gottlieb Steen & Hamilton LLP, in the heart of Manhattan's financial district. They were bidding at a live auction for the most coveted assets bankrupt Nortel Networks had up for sale.

Shortly before midnight, Ericsson emerged the victor with a bid of US$1.13-billion. Mr. Bromley called the court-supervised sale a "milestone transaction." And for Ericsson it was. The Swedish teleco's prize was Nortel's vaunted wireless assets - the very technology powering the tens of thousands cellphone calls, text messages and mobile tweets being made by New Yorkers on the streets below.

The sale, which will close on Sept. 30 barring any regulatory hurdles, will help transform Ericsson into a mobile network behemoth in North America, giving it the technology it needs to sign lucrative contracts with Canadian and U.S. carriers for years to come.

It caps a remarkable string of deals by Ericsson since February that has made North America the company's most important.

"Being able to acquire this part of Nortel gives a very well-rounded base to tackle the business that we already have, plus a lot of the new business that we're going to have," Angel Ruiz, head of Ericsson North America, said in an interview. "It positions us very well."

North American operations will represent upward of 20% of the company's business worldwide after the deal closes, making it far and away its most valuable region. "With the added market share this brings to the table with customers like Verizon and Bell and Telus and US Cellular and a number of Tier-2 carriers, it's going to go from a US$2-billion business to perhaps over a US$5-billion business [annually]," the executive said.

The completion of the Nortel sale will finish off a troika of deals that have catapulted the company to a market-leading position in a North American market readying itself for a massive upgrade cycle.

In February, Ericsson won the contract to become the principal supplier of U.S. giant Verizon Wireless's build-out of its next-generation network. That was followed by a seven-year, US$5-billion deal to manage the networks of Sprint Nextel Corp., another major U.S. operator.

The transactions will leave Ericsson with more than 14,000 employees in North America, including 2,700 in Canada spread between offices in Vancouver and Toronto, where its Canadian operations are headquartered, as well as a sizeable research facility in Montreal. The acquisition will also hand to Ericsson Nortel's highly regarded research labs in Ottawa.

It's no surprise the sudden and formidable rise has left many wondering where Ericsson has come from.

The history of the company in many respects mirrors Nortel's, once a chief rival. Founded in 1876 in Stockholm, Ericsson spent much of the past century developing and selling phone equipment and systems, fuelled in part by the same nationalistic patronage from the Swedish government that Nortel enjoyed from Ottawa through contracts and generous tax incentives.

"They've been around for a very long time," says Douglas Reid, professor of international corporate strategy at Queen's University's School of Business and an expert on the telecommunications industry.

The company has held a presence in Canada for decades, as well, opening its first offices here in 1953. Ericsson is also a considerable investor in Canadian R&D, spending more than $2-billion over the past 10 years - more than $126-million in 2008 alone - primarily through its labs in Montreal, which represent the company's second-biggest facilities in the world.

Mr. Ruiz said the political furor that has erupted in recent weeks over the Nortel sale has come as a bit of shock to the company. "Considering our history," he says," I'm a bit surprised at some of the comments and perception."

Dwight Duncan, the Minister of Finance for Ontario, for example, has called for the sale to be stopped on grounds that it constitutes a national security concern and could spell the end of some high-tech jobs. The federal Liberals have also implored Industry Minister Tony Clement to conduct an in-depth review of the transaction to see if it violates foreign-ownership provisions in the Investment Canada Act.

Echoing what Ericsson's incoming CEO Hans Vestberg said this week, Mr. Ruiz said the company has no plans to scale back Nortel's Ottawa operations for the time being. "We have always touted our R&D presence in Canada, and that will continue to be very, very strong," he said.

The two product lines that comprise Nortel's wireless unit are CDMA networks, a technology still widely deployed by North American carriers, but which is undergoing a gradual decline here and around the world, and so-called long-term evolution or LTE systems, the ultra-fast technology now gaining ascendance with carriers and the gear that will most likely power the next generation of wireless networks.

In LTE, the 500 or so researchers that work at Nortel's Ottawa labs are resources that Ericsson will want to retain, and indeed grow, as the race toward the commercial deployment of the new technology gathers pace through 2010 and beyond, Prof. Reid said.

"The people will likely remain," he said, adding that "meaningful and important telecom work here will still be done."

The only difference? "They'll be doing it under the Ericsson flag not the Nortel."

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Ericsson confident of Nortel sale, but braced for hurdles

Jamie Sturgeon | Financial Post | July 28, 2009

Swedish telecommunications giant Ericsson said Monday it was confident that its acquisition of Nortel Networks Corp.'s wireless business would be approved by bankruptcy courts as well as Canadian and U.S. regulators, but acknowledged that hurdles remain.

Primarily, Hans Vestberg, chief financial officer of Ericsson noted Canadian technology giant Research In Motion Ltd.'s attempts to interfere with the sale, including urging federal authorities, which still must approve the deal, to intervene.

"We feel confident that this will go through but we have a lot of respect for the process that will come," Mr. Vestberg said on a conference call. "There are some regulatory issues left to be defined."

Ericsson won a three-way auction for most of bankrupt Nortel's wireless assets early Saturday, agreeing to pay US$1.13-billion for the Toronto-based company's technology and certain patents related to CDMA and LTE wireless network technologies.

The unit, Nortel's biggest by revenue, makes and develops CDMA networks used by many major mobile-phone carriers including Bell Mobility and Telus Corp., as well as next-generation Long-Term Evolution, or LTE networks.

Led by North American carriers, LTE, which will be able to deliver data at high speeds to mobile devices even more sophisticated than today's smart phones such as Apple Inc.'s iPhone or RIM's BlackBerry, is poised to become the global standard over the next several years.

Ericsson outbid European telecom rival Nokia Siemens Networks, as well as U.S. private equity firm MatlinPatterson Global Advisers LLC.

Waterloo, Ont.-based RIM has expressed interest in the assets, saying last week it would have bid as much as US$1.1-billion for them, but said it was blocked by Nortel from participating in the auction.

In a statement released late Sunday, RIM said it remained interested in pursuing certain assets, and urged Canadian authorities to review the sale, which would see Nortel's extensive technological base fall to a foreign firm.

"The government has the authority and responsibility to get involved to protect vital Canadian interests," the company said.

Tony Clement, the federal Industry Minister, has said it was his preference to see Nortel's technology remain in Canada, but has so far declined to step into the sale process.

Nortel will bring a request to have the sale approved by bankruptcy courts in the U.S. and Canada on Tuesday. The deal will also be subject to further regulatory approval.

Mr. Vestberg said Ericsson expects the deal to close late in the third quarter and have the business fully integrated by the fourth.

He said that while there were synergies to be found between its existing North American operations and the new assets, Ericsson planned to keep Nortel's wireless operations in Dallas and Ottawa unchanged for the time being.

The unit employs about 2,500 people, with about 800 workers based in Canada, primarily in Ottawa, Nortel's historical research and development hub.

Nortel, an icon of Canada's technology sector for more than a century, filed for bankruptcy protection in January, citing the recession for thwarting a turnaround plan begun in 2005 with the appointment of Mike Zafirovski, the company's current chief executive.

The company, which has its shares delisted from the Toronto Stock Exchange on June 26, is in the process of selling off its major business lines.

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New direction for Rogers: slow and steady, new CEO says

By Jamie Sturgeon | Financial Post | 05. 30. 2009

It's a not an easy position to be in, but it is an enviable one. Nadir Mohamed was elevated to the corner office of Rogers Communications Inc., the largest wireless and cable company in Canada, in March. His job since has been to keep it there.

The challenges are tall for the new chief executive, who succeeded company figurehead and founder, Ted Rogers after his passing in early December.

They loom largest in wireless, a division that has become a formidable earnings engine, but is now threatened by structural shifts taking place across the industry. To start, he must maintain Rogers' edge over national rivals Bell Canada and Telus Corp., who are quickly catching up in a range of areas.

He must also guard the company's current share of the wireless-subscriber pie from new entrants eager to syphon off customers looking for better products and services for less money. All the while, he must ensure Rogers' other lines of business in cable and media remain profitable.

Most importantly, though, the 52-year-old telecom veteran must ready the company -- and shareholder expectations -- for a period of slower growth.

"The world is changing," Mr. Mohamed said in an interview. "How we won the last five years is going to be different from how we win going forward."

For more than half a decade, Rogers has been the unequivocal market leader in pushing consumer adoption for wireless and cable services. It has become No. 1 because it has built out the most advanced networks and offered the latest devices. But now, the company is at risk of being a victim of its own success as nearly seven in 10 Canadians own a mobile phone and about the same amount subscribe to digital or cable TV.

The company has reached an inflection point, Mr. Mohamed says. To be sure, there's room to grow, just not as quickly.

"No question that when I look ahead toward the next five years, growth is going to be much more modest."

Gone are the days of debt-leveraged blistering growth. Protecting market share, returning value to shareholders and a keen eye on controlling costs are Mr. Mohamed's intentions. In short, they're the hallmarks of a company that is maturing.

The new direction Mr. Mohamed is taking has already been felt. The company nearly doubled its quarterly dividend to 58¢ last quarter. More telling was the ballooning of the company's share-buyback program to $1.5-billion -- or about 10% of common stock -- from an initial $300-million, announced this month.

"The move toward a share buyback has been very positive. They're saying we want to return value to stockholders," said Dvai Ghose, equity analyst at Genuity Capital Markets.

"The problem with being a mature company is that you tend to be fat and lazy. What the company has to do is show it hasn't lost that entrepreneurial spirit. It's a delicate balance."

Despite commanding the biggest share of wireless and cable subscriptions in the country, Rogers can hardly afford to grow complacent now. Alongside slowing penetration among consumers, there is increasing competition to pick up the slack, most pressingly in wireless.

Revenue in the unit, which accounted for over half of $11-billion Rogers took in last year, faces new pressure on multiple fronts.

Declining prices on voice plans from discount brands is driving down average revenue per subscriber for all three major wireless operators. Rogers, Telus and Bell all operate their own so-called "flanker" brands in Fido, Koodo, Solo and Virgin.

The larger threat, however, comes from a clutch of soon-to-be rivals in Globalive Communications, DAVE Wireless and Public Mobile who are readying to launch later this year or early next with widely anticipated cheaper plans.

"That's going to create pressure, no doubt," Mr. Mohamed said. "But there really are two games being played out. At the higher end is the core of what we're trying to do at Rogers."

With limited network capacity, the smaller entrants will likely be focused on voice and text plans, analysts say.

Rogers is aiming for the much more lucrative data-heavy users, which represent the future of the industry, the CEO says. "It's all about mobile Internet and data, the iPhone and BlackBerry and now Android."

Mr. Mohamed must also keep an eye on what the other incumbents have planned. Both Bell Canada and Telus are introducing new networks early next year that will rival Rogers' own. The rollout will enable the two to offer advanced devices such as Apple Inc.'s iPhone or the HTC Dream and Magic powered by Google Inc.'s vaunted Android platform. Rogers is the exclusive carrier of the iPhone currently and is introducing the Google handsets this week.

"The question is, who has the best network quality in terms of reliability and speed? I think it will be a while before the others get there," he said "And we're not sitting still either."

Investment in network technology will remain a chief concern. However, as growth slows the focus will be on retaining customers, Mr. Mohamed said. Long derided for its inattention to customer service and opaque billing structure, the new CEO said yesterday Rogers is investing heavily in a new integrated system subscribers will clearly understand.

"We think the next battle will be fought closer to the customer," he said. "The network is our strength and we'll continue to build on that. But there is a layer on top of that, which is the interaction with the customer."

For a slowing company, that will be crucial if it hopes to continue to win.

jasturgeon@nationalpost.com

Tough times call for ...