Call-Net could be next telco to enter consolidation game with power companies

The aftershocks of Manitoba Telecom Services Inc.’s (MTS) surprise bid for Allstream Inc. continue to rumble throughout Canada’s telecom sector, and one industry analyst suggests that a further telecommunications shakeout is on the way. The $1.7-billion deal has changed the communications industry in this country by creating what could be a third national player to compete against incumbent operators Telus Communications Inc. and Bell Canada. While the heads of both MTS and Allstream say the combined company, if they can close the deal, will create viable competition on the national scene, the transaction could have an equally dramatic impact on how Call-Net Enterprises Inc. moves forward with its plans. Through its Sprint Canada subsidiary, the company offers local, long distance and Internet in several Canadian cities, but its future success in this arena appears to be clouded by the arrival of the combined MTS/Allstream. Iain Grant, managing director at the SeaBoard Group, considers the time right for change at Sprint Canada’s parent company. "Call-Net has to do something because everybody else is grabbing the headlines and grabbing some momentum," he says. "Call-Net has been making a virtue of putting their heads down and just plugging away. They’ve done a good job of plugging away and they’re making money now … but now it’s time as we counselled Allstream to put your head up and start thinking about the long game. They need some help there." Grant suggests that Call-Net needs to change its colours or risk becoming a specialty outfit. "I think Call-Net has to really think about either changing the way they walk or becoming a specialty boutique," he says, adding that Call-Net needs to look for partners. "I’m not suggesting SaskTel. I am suggesting that there’s a whole bunch of companies with power backgrounds who need someone to glue them together," Grant tells Network Letter. Call-Net’s ability to sell nationally through a national sales force combined with these power companies’ telephone backbones in a lot of Canadian communities "may well be an opportunity to create a third or if you will a fourth national carrier out of those elements," he says. The impact of the MTS/Allstream deal may not be limited to Sprint Canada, either. Grant suggests that may force 360networks Corp., the wholesale fibre capacity provider that acquired GT Group Telecom Inc. in November 2002, to cozy up to fixed wireless access providers in need of fibre. "There are a whole number of other Wi-Fi, WiMAX carriers who don’t fit into the traditional paradigms that may well need to have a wholesaler," he explains. But there is also talk that AT&T Corp. may need a partner to serve its corporate customer base that includes the likes of Ford Canada and General Motors. "You also have companies like AT&T who are beginning to spread their wings, looking to serve … all of their marquee clients," Grant says. He explains that this could open the door to 360networks because AT&T would rather not get into bed with Bell, Telus or Sprint. Asked whether more consolidation is about to happen in Canada, Grant was cynical. "Unless you are to tell about Thunder Bay Telephone merging with Bruce Telephone and absorbing Northwestel, there isn’t a lot left. But there are opportunities such as the power telephone companies that really ought to become a Stentor if they are going to survive." For more on the MTS/Allstream deal, please refer to the article in this issue.

Call-Net could be next telco to enter consolidation game with power companies

News | March 31, 2004

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