NATI dreads impact of xwave sale on economy of Newfoundland and Labrador

The possible sale of Aliant Inc. subsidiary xwave is raising concerns in Newfoundland that jobs and investment in the area could be lost. The Newfoundland and Labrador Association of Technical Industries (NATI) is lobbying the provincial government to ensure the company lives up to obligations it has made over the past few years. xwave began life as a provincial Crown corporation in Newfoundland and Labrador. When the firm was privatized in the early 1990s, it was purchased by a consortium dominated by the local ILEC NewTel Enterprises. By the end of the decade, NewTel had been merged with the other incumbent telcos in the region to form Aliant, which is now majority owned by BCE Inc. (NL, Oct. 11/99). Before ceding control of the IT company, the provincial government insisted on certain industrial benefits for Newfoundland. NATI chair Harold Snelgrove explains to Network Letter that ancillary work would be farmed out to local firms and direct and indirect jobs would be created. Maintaining the xwave corporate head office in the province was also a condition of sale. The current agreement, slated to expire in 2007, calls for the government to contract out $2 million in IT work and xwave contracting out a similar amount. That hasn’t worked out as planned, however, according to Snelgrove. "The intent’s always been that it would be like a project-type contracting that would help grow the local industry and create experience and so on and so forth," Snelgrove maintains. "As it turned out, 98% of the time, probably 99% of the time, the contracting out was always in the form of bodyshopping, which really is not the way to grow the industry. It becomes a little bit of cash flow for some of the small- and medium-sized companies." For the fiscal year ending in March 2002, the provincial government hit all its contracting out targets but xwave did not, Snelgrove says. It came up short on the contracting out provisions and rather than creating jobs, it has actually started laying off staff. NATI is demanding a remediation plan to correct any shortfalls. Now Aliant has said that it is trying to sell xwave (NL, Jan. 28/03). That worries Snelgrove. "I may be second guessing them but how can this company plan a remediation plan now that it’s up for auction?" he asks. "But the three potential options are: obviously a new buyer could come in and take xwave and do absolutely nothing or actually cause the situation to be worse. I guess the positive side is the new buyer could do a whole lot more or do better than what’s currently happening. And the third option, as I understand it, is government can exercise a right that I believe is in the contract not to assign the contract to the new buyer." Lobbying government NATI is concentrating its efforts on lobbying the Newfoundland government. A meeting between the government and the association to discuss the situation is scheduled for February 11. Snelgrove asserts he has no dispute with xwave itself. "It’s not us against xwave or any of that," the head of Triton Data Inc. states. "I have an IT company here as well and I fully understand what’s happened to the marketplace over the last two years. But we have to be cognizant of what government is going to do." There are penalties set out in the xwave contract for failure to live up to the industrial benefits package. But Snelgrove worries that current management or new proprietors will simply shell out the cash and write it off as a cost of doing business. He prefers rolling the penalties and target shortfalls forward from year to year and insisting the new owners live up to the original commitments.

NATI dreads impact of xwave sale on economy of Newfoundland and Labrador

News | 02/10/2003 5:00 am EST

To keep reading, get a free trial.

Already a Subscriber?

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us