Rumoured Microcell-AT&T Canada combination could prove fruitful

Microcell Telecommunications Inc. and AT&T Canada Corp. are said to be having quiet discussions about merger opportunities and the chance to take on Canada’s largest incumbent telcos in both the wired and wireless markets. Commenting on a potential Microcell-AT&T Canada combination, Yankee Group Canada senior analyst Jeremy Depow says he’s heard similar rumblings, and is convinced Microcell seems set to make a big play of one kind or another. "We’re not quite sure what (Microcell’s) strategy is, but they seem to be doing something that they’re not talking about. It may be along those lines," Depow tells Report on Wireless. "There’s got to be something going on. They’re quite tight-lipped as to what it is. They feel like they’re going to save face and be here for a while, so there’s got to be something going on at the upper levels." Both companies have complementary and compelling yet under-performing service offerings. The duo could exploit each other’s strengths to gain entry into other market segments. A combined entity would have a large enough basket of products to be able to offer a well-rounded bundle of wireless and wireline services and present itself as a serious contender for ILECs Telus Corp. and Bell Canada market share. AT&T Canada has a small, but nonetheless significant, share of the wireline business market, which Microcell could use as leverage to compete against its three national wireless rivals. Earlier this year, the Montreal-based wireless operator unveiled a strategy to move out of the corporate account market spurred by the need to conserve resources (RoW, Jan. 20/03). AT&T Canada could use Microcell’s significant presence at the consumer level to gain entry where it doesn’t have any presence at all to compete against the ILECs. Later this year, AT&T Canada will also suffer from the loss of the AT&T brand, which may hurt the company going forward as it fights to gain awareness among consumers and business customers. "It’s a big loss to lose that brand and they need to do something as far as that goes, so they need some assistance on that," says Depow, adding, "I’m just not sure if the Microcell brand (Fido) would be strong enough." The scenario of a Microcell and AT&T Canada combination isn’t new as analysts have kicked around the idea in the past. But the timing may now be right for a merger or some sort of business combination since both companies have undergone significant restructurings and are scheduled to soon emerge from bankruptcy protection with healthier balance sheets and virtually no debt. Other industry observers have suggested another possible scenario as well, stating that a combination of Microcell and Call-Net Enterprises Inc. shouldn’t be discounted.

Rumoured Microcell-AT&T Canada combination could prove fruitful

News | 03/31/2003 5:00 am EST

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