Allstream promises business as usual following name change from AT&T Canada

One of the country's major CLECs is operating under a new name but does not plan any major changes to its basic business strategy. AT&T Canada has changed its moniker to Allstream Corp., effective immediately. Because of contractual problems with AT&T Corp. in the United States, the Canadian company had to come up with a new handle by September.John McLennan, vice-chair/CEO of the telco, reported during a news conference announcing the name change that Allstream has in the range of 110,000 to 120,000 customers. About 80% of the firm's revenues derive from 4,000 clients. He vows to continue doing business as usual. "We're very concentrated on a relatively small number of customers simply because we're not in the consumer business, we're not in the retail business, we're not in the wireless business," he told the June 18 news conference. "We are in the business of solving communications solutions for our customers. And that is core and root of our business." Keeping to the scenario is necessary if the telco is to survive, one telecom analyst believes. Peter Rhamey of BMO Nesbitt Burns tells Network Letter the rechristened company must stay with larger customers. "They have to focus on the business segment. They want to stay out of the small, SME, which probably makes sense because you don't get much bang for your buck there," he notes. "They want to do enterprise, which probably makes sense and they have some capability there." McLennan announced that president/COO John MacDonald will be in charge of the relationship with AT&T in the U.S. McLennan has no use for the naysayers who predict the change in name will cause a change in relationship. "Right now we have not lost any revenue. Everybody speculates that AT&T are going to take all of their business and go down the road somewhere with it. That isn't going to happen," he maintained. "We are as active with AT&T as we were before and very simply it's because that's the practical way to get the contract delivered today." MacDonald, a Bell Canada alumnus like McLennan, believes the two telcos can continue to have a good partnership across the border."AT&T is a fabulous global brand, there's no question about it. And that brand will continue to exist in Canada. They will have flexibility in terms of dealing with other carriers," he remarked at the Allstream news conference. "Now what I've said to the folks at AT&T corporate is that I want to be your absolute best delivery option when you have to deliver traffic in Canada, whether you're talking about voice traffic and even data traffic. The other thing is we will have flexibility as well, in terms of fostering, developing new relationships with other carriers. The centre of gravity will continue for some period of time to come to be with AT&T corporate. They'll have flexibility up here, we'll have flexibility elsewhere." Rhamey is skeptical about that assertion. "The one place I'm a little curious about is that they said they're going to be able to do a lot of international connectivity," he explains to NL. "Are they in any way advantaged over their major competitors, that being Telus and Bell, in doing that? I'm not so sure, we shall see." MacDonald is hopeful that new technologies will assist the CLEC into becoming profitable. He expects the telco will spend about $140 million, or 10% of revenues, on capex. "We're not going to be a company that is going to be big iron, big glass and big back office. We have to change and try to take advantage of some of the more disruptive technologies that are being developed for prime time," the president explained. "It could be working with a hydro company, it could be working with a municipality, it could be working with a cable company, etc. in terms of delivering a solution. Because the focus of our brand is not in terms of we deliver copper or fibre to your home or your business. It's basically we deliver a solution. And we'll put together all the various pieces to deliver that solution. And I don't think that is necessarily a capex-extensive business." Rhamey agrees with this strategy, saying Allstream is technology agnostic. He knows the company could make a mistake if it jumped into a rollout too soon, but doubts that will occur. "The key thing is it comes down to, as we all know in this industry, execution, execution, execution," the analyst states. "So if takes voice over IP and starts using it far too early, which I don't think he's going to do, but if he were to do that, then, right idea but a year too early and the risk is that you lose customers because of it. Provided you're doing these things prudently, it makes an awful lot of sense." Rumours persist that Allstream is a takeover target, with the most-mentioned suitor being Telus Corp. Both sides have denied any talks are underway. McLennan was quite vehement and alluded to the western ILEC in his response. "Right now we have not been approached by a takeover offer and I believe that one of the telephone companies that people are speculating are interested in acquiring our company said that they do not have any open file with regards to our company and I would like to reiterate that we have no open file with them. So we are not in discussions with any telephone company at this time." Allstream shares have generally been rising since the announcement of the name change. Rhamey believes some are investing strictly on the takeover talk while others have more faith in the telco itself. "I think people see a company that has been around for a long time, that has a track record of being able to generate recurring revenue and EBITDA, and looking at it and saying, 'well, this company now has no debt.' And the advantage of having no debt is that there is no ongoing interest payment to service in order that would cause profits to be adversely impacted," he says. "So when you look at it - no debt - and it becomes a very interesting investment for investors because it's almost like an option on the future."

Allstream promises business as usual following name change from AT&T Canada

News | 07/02/2003 4:00 am EDT

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