MTS Allstream Struggles to Find its Feet

Carrier hopes to succeed with unique services When Calgary hotel operator Hospitality Inns Ltd. had trouble with its communication technology, the firm turned to MTS Allstream Inc. for a solution. But although the service provider answered Hospitality’s call, it seems MTS Allstream has problems of its own. According to Marc Rheaume, vice-president of Hospitality, his company’s Best Western Hospitality Inn in Calgary needed help. "We had aging infrastructure in our messaging department," he said at an MTS Allstream event, MindShift 2006, in Toronto early last month. "The hardware needed to be replaced." But replacing the increasingly cantankerous Exchange Server from Microsoft Corp. and managing the equipment over three years would have cost nearly $100,000. And as Hospitality considered its options, the hotel’s main IT expert left the company, which put a serious dent in any in-house management plans. So Hospitality called on MTS Allstream for a different option. The carrier offered its Allstream Collaboration Suite (ACS), which provides a number of hosted Microsoft messaging systems. Now Hospitality essentially rents Exchange Server, Sharepoint, Live Communications Server and Office Live Meeting 2005 from MTS Allstream for email, document sharing, instant messaging (IM) and Web conferencing. The hosted model costs about $30,000 over three years, Rheaume said, adding that renting is not only cheaper than owning, it also addressed the in-house management problem. And it’s flexible. You only pay for what you use, seat-by-seat. "We wanted to make sure we were right-sizing our investment," he said. ACS at Hospitality is up and running. Meanwhile MTS Allstream is struggling. Paradise LostManitoba Telecom Services Inc.’s (MTS) acquisition of Allstream in 2004 heralded a new age for Canadian telecom. Here was a third national enterprise communication service provider, a choice beyond Bell Canada and Telus Corp. The provider had the surefootedness of an incumbent in Manitoba-focused MTS and the nimbleness of a competitive local exchange carrier in nationwide Allstream, the best of both worlds. But MTS Allstream’s own world seemed to crumble early in the relationship. Faced with foes expanding their footprints and product offerings, as well as declining revenue from legacy services, the Winnipeg carrier announced a necessary restructuring last November. The firm said it would release 750 to 800 employees in early 2006, most from the Allstream division. In the fourth quarter of 2005, MTS Allstream recorded net income of $14.6 million, down significantly from the $42.3 million it collected in Q4 2004. Full-year income in 2005 was $213.7 million, compared to $305.1 million in 2004. The cost of integrating Allstream and changes in the national division’s revenue mix were hurting the results. In February MTS Allstream organized itself into two groups: a consumer markets segment headed by the former president of MTS’s Manitoba operations, Kelvin Shepherd, and an enterprise solutions segment under former Allstream president John MacDonald. Brave New WorldThus the stage was set for MindShift, where MTS Allstream execs put on brave faces and explained how their beleaguered team would not only survive, but thrive in this tumultuous market. MacDonald said MTS Allstream would prove itself as something more than a "bytes-‘r’-us" network operator. The company means to impress businesses with unique products, such as ACS for capital-outlay-phobic corporations, and radio-frequency identification (RFID) platforms for companies involved in complicated supply chains. The firm wants to shoot the gap between basic network services and advanced communication applications, MacDonald said, noting a chasm between the flashy collaboration systems from software makers and the underpinning routers and switches required for support. If MTS Allstream can showcase itself as a competent integrator in this regard, the firm will succeed, he said. Ed Lavin is president of Delphi Solutions, a telecom equipment installation and servicing firm that MTS Allstream bought last summer. He said the carrier might find success as a custom equipment installer, providing the sort of individual attention that used to grace the industry. "I think that’s something dramatically missing today," he said. MTS Allstream has garnered interest among some big businesses. Scotiabank, Great-West Life and Via Rail Canada Inc. rely on this service provider’s offerings for various kinds of network connectivity. The telco brags that 120 of its business clients have signed up for the IP-VPN service. Hospitality certainly seems happy. According to Rheaume, ACS has brought about significant benefits. For example, communication between the hotel’s two front desks – each on the opposite side of Calgary’s Bonaventure Drive – used to be difficult. Passing confidential customer information from one desk to the other by phone required that staffers secrete themselves in a back room for privacy, leaving the hotel guest standing at an unmanned counter, wondering if something’s wrong. Now the front desk employees can IM each other for secure communication without leaving their posts, which means guests don’t feel ignored. MTS Allstream faces challenges, but for at least one client, the carrier had the right mix of equipment and know-how. "Rarely is the promise of technology kept," Rheaume said. "This is a happy exception."

MTS Allstream Struggles to Find its Feet

News | April 1, 2006

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