Analysis: Combining hydro telecoms only makes sense

Greater telecommunications consolidation could be on the horizon in Canada. Last month talk surfaced that Toronto Hydro was shopping its telecom subsidiary and Ottawa Hydro was also looking to unload Telecom Ottawa. The same usual suspects are mentioned when talk of telecom consolidation surfaces. Rogers Communications Inc. and Bell Canada top the list. Telus Corp. should also be considered a top contender since an acquisition in central Canada would further solidify its presence in a region rich in corporate head offices and enterprise business opportunities. MTS Allstream Inc. is another likely contender, although it appears more focuses on the upcoming spectrum auction at the moment. Atria Networks is also a potential suitor. The company, which was formed by the merger of Guelph and Waterloo's utility telecoms in September 2005, has been on an acquisition spree lately. Most recently, it acquired FibreWired Hamilton, the utelco of Hamilton Utilities. This last company could be an interesting play. A few years ago, 10 utility telecoms in Ontario started working together formally to provide service to customers with several offices throughout the province. The companies would "mesh" their infrastructure together to create a nearly Ontario-wide fibre network. There was even talk that the Ontario-based utelcos would take this formula to the West. Could we see a revival of this strategy?While that's unclear at this point, we know that at least two of the province's larger utelcos are on the block. Parties have been kicking the tires at Toronto Hydro Telecom because it has an extensive fibre network in Canada's largest urban centre and operates one of the largest municipal Wi-Fi networks in North America. The same enthusiasm isn't being expressed for Ottawa's telecom arm, and it's unclear how many companies are coming to the table with offers for the enterprise, which according to sources is losing money. The utility telecoms have garnered some significant share in the MUSH (municipalities, universities, schools and hospitals) segment of the enterprise market. While it's not huge compared to the big telcos, it's important, particularly if the telecom operation is being shopped around. Competition in the enterprise segment has been largely fought between three companies - Bell, Telus and MTS Allstream. The utelcos are bit players in terms of market share, but have important customers and, if combined, could become more significant players. This is a scenario that's been thrown around for a number of years. If the utelcos are to take their business to the next level, now is the time.

Analysis: Combining hydro telecoms only makes sense

News | February 4, 2008

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