BCE aims for the ‘Globe’ but may be forgetting its own backyard, analysts warn

With all the hoopla over BCE Inc expanding into broadcasting and publishing, the conglomerate may be in danger of disregarding its core business. Several analysts believe the company is ignoring its telecom roots in favour of sexier, but not necessarily more profitable sidelines. "I’ve seen some articles where they don’t even mention Bell Canada. I find that quite odd," Johanne Lemay of Lemay-Yates Associates told Network Letter. "This is the main revenue-generating asset of BCE. It seems to be forgotten in all the hype surrounding content." BCE chair Jean Monty has been popping up all over the place, promoting "integrated information, communications and entertainment." His ICE mantra has led to BCE skating through the financial markets, scooping up whatever it can. Nortel has been spun off, Teleglobe bought up, the CTV purchase is before the CRTC. Now comes its announcement of a new media company involving Thomson Corp and Woodbridge Co Ltd, the holding company of the Thomson family. The key asset the Thomsons bring to the deal is their flagship newspaper, the Globe and Mail. BCE is hoping the Globe will supply more content for its Sympatico portal, which linked up with the U.S. portal Lycos last February. It provides the telecom giant with opportunities. "I think you could probably argue that the Globe and Mail is a more recognized brand name than Sympatico is," Mark Quigley, senior analyst with The Yankee Group in Canada, maintains. He expects to see improvements in the portal, but not for a while yet. "When the Sympatico-Lycos thing was announced, it took them three or four months before the web site changed," he says. "BCE has a great opportunity to leverage all kinds of buckets into one another. All of a sudden CTV becomes a presence on the Globe and Mail’s web site as the Globe, I’m sure, will become a presence on the CTV web site as well." The principals of the new merged company made much of the fact the nine Globe portals will fall under the Sympatico umbrella. But that is just housekeeping. Earlier this summer, Globe Interactive signed a deal with Sympatico-Lycos Inc to provide mutual fund and investor data to the Internet company. The merger means the information will now be provided by a subsidiary, rather than a licensing group. Many observers worry that BCE is putting the cart before the horse by favouring content over access. "I don’t believe that content has really proven that it can be a substantial revenue generating opportunity for anyone yet," Lemay asserts. Dvai Ghose of CIBC World Markets is even more blunt. "Content sells to access, and quite honestly, I think access can just stand out there and say ‘you know what content? You’d better come to me because you have very limited alternatives. I have a lot of alternatives.’" As far as Ghose is concerned, content is just another commodity for a web portal. Ownership is a minor consideration. "BCE buys switches from Nortel. Nortel sells switches to many players including BCE and its competitors. Therefore, they should not be owned by the same entity. So, isn’t that true of content as well? BCE uses content from various different sources — or at least BCE bloody well should." The lust for content assumes that Internet surfers are too dumb or lazy to search out anything other than pre-selected material. Subscribers to any ISP can easily gain access to the Globe and Mail site. Content deals do not prevent access from other ISPs. Even though Time-Warner’s group of publications have had an agreement with America Online for many years now, readers can still locate the material using MSN, PSINet—or Sympatico. The Yankee Group’s Quigley is supportive of the merger, although he recommends patience. "It’s going to take time to develop all that content and it’s going to take time to position that right for that growing consumer base. Do I think that it’s going to yield fruit going forward? Most definitely," he states. "I think that there are some real synergies that exist there and I think that there is certainly the potential to really take this and transform both businesses. But, at the end of the day, all of this depends on old-fashioned things like successful execution of business plans and marketing plans and that sort of stuff. I certainly see that there’s great opportunity though." The emphasis on high-profile industries leads some to wonder where the telecom sector figures in BCE’s plans. "I would like to see from BCE something which we don’t see, which is how really they will insure a growth for Bell Canada," Lemay suggests. "Now you have Bell Mobility integrated back into Bell Canada. This to me is a substantial growth opportunity and you don’t hear a lot about it." Ghose agrees. "(Monty’s) concentration should be on access. Wireless in western Canada, DSL throughout Ontario and Quebec and for SMEs, the fibre optic asset Intrigna in western Canada. Those are his core businesses." If Bell is caught napping on its telecom front, it opens up a perfect opportunity for competitors to steal business away from the established telco. Bell executives may find themselves occupied with non-core assets, risking the original franchise. "It could provide some opportunity, although Bell is a company that has certain depth in terms of human resources," Lemay cautions. "It does not necessarily mean it’s an easier time for CLECs."

BCE aims for the ‘Globe’ but may be forgetting its own backyard, analysts warn

News | September 25, 2000

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