Stiff competition sees Bell Canada step up business transformation efforts

During BCE Inc.’s annual business review conference this month, president and CEO Michael Sabia outlined of the four key characteristics that will compose the "new" Bell: growth services; bandwidth/IP platforms; customer experience; and cost structure. "We believe that a company with those four fundamental strengths will be a company that will prevail in the new world of telecom, a world of seamless integration of communications services," he said. "That’s where our next-generation services and our IP capabilities come together. That’s where service differentiates us and becomes a crucial element of how we retain customers, and how we atttract them, especially multi-product customers that are such an important centerpiece to this company." This new world of telecom, however, will likely also include the increased erosion of network access services (NAS), commonly referred to as local landlines, due to the rollout of IP telephony, a serious threat to the future of Bell by deteriorating the service that made it an incumbent giant. Stunting the initial flow of customers to the cablecos is the retention Sabia spoke of, and one of the biggest challenges the new Bell will face. According to Bell’s year-end results, 2005 saw a local landline decrease of 325,000, or 2.5%. Sabia said this figure "came in very much as we expected," and revealed what he anticipated for the coming year as well. "I think we expect to see a step up in NAS erosion, something overall in the range of 3 to 5%, with that heavily weighted towards residential line losses. I think that’s really no big surprise to us and we’ll address it with a very focused program," he said, adding it will be built on service, customer retention, on surgical marketing, and an intense focus on cost reduction. These four characteristics are also going to aid Bell throughout its ongoing transformation. With 2005 in the past and the foundation laid for 2006, Bell enters what it has identified as a transition phase for 2006-2007, acknowledging its goals of managing erosion and competitive pressures, and stepping up cost reductions. Specifically, by sometime in 2008-2009 Bell wants its growth services – Internet Protocol, information and communications technology, wireless, Internet and video – to account for 65% of total revenues, up from their current 47%. To further retain clients, Bell is looking to increase its number of multi-product households. The firm currently counts 60% of their client base as two-plus customers, and would like to grow the amount of three-plus customers to 26%-28% by the end of 2007 through diverse offerings. "We’ll continue to move on a variety of different fronts," said Sabia. "We’ll continue expanding our residential broadband services… and we will be, in Canada, the leader in what I like to call on-demand television as we roll out IPTV." Ease of billing through bundled packages and more attention to customer service are definite tools for retention in the face of competition, but quality could be hard to achieve in light of other quantitative goals. Bell has set a target of $700 million to $900 million in savings this year through cost reductions and will be reducing its workforce by 3,000-4,000 employees over the year. Sabia commented that one of the biggest challenges of 2005 was meeting customer requests with 5,000 fewer employees, a challenge that could be magnified with more layoffs. Added Sabia: "we have to bring the size of the company down a bit as we continue to contend with the issues of intense competition and the impact that has on our need to deliver on a cost structure." Sabia reiterated that changing the company’s mix is not an easy process, and one without shortcuts. But as he was addressing shareholders, it was not lost that restructuring was necessary financially as a result of the new dynamics of the industry. "I think it’s probably fair to say we have a full agenda in accelerating the work that we’re doing in rebuilding Bell," he said. "Rebuilding it operationally, rebuilding it financially, with a steady focus on mix, service, steady margins and lower capital intensity." He continued: "We started that process early, we started it at the right time. The operating progress we’ve made is very substantial. When we’re done, Bell will have more diversified sources of revenue growth and those will be profitable. And we will not be dependent on any line of product or any one technology. We’ll have a broad base, and that will continue to drive and propel the company’s profitability going forward."

Stiff competition sees Bell Canada step up business transformation efforts

News | February 2, 2006

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