Telcos show signs of stemming the tide against cable

Fourth-quarter and year-end financial and subscriber results from three of the Canada's major incumbent telephone companies demonstrate that they all appear to be stabilizing losses in their local residential businesses. MTS Allstream Inc., BCE Inc. and Bell Aliant Regional Communications posted solid revenue and subscriber figures, driven by wireless, Internet and TV services. Local residential telephony is still under pressure from the cable company rivals, but the telcos noted their retention programs are working to stem losses and winback programs are paying off as returning customers are spending more. Pierre Blouin, president and CEO at MTS Allstream, said during a conference call with analysts on February 5 that 2007 marked a turning point for the company. "The company has proven that it can meet the competitive challenges of our industry. We're now looking at the future with a positive view of growing the business," he stated. "The strategy of discipline and focused execution we developed in 2006 is working and delivering improved results for our company."After joining the Manitoba firm in 2005, Blouin initiated a reorganization that saw MTS Allstream realign its business units and cut costs with the goal of improving the financial picture for the company. That strategy is now paying off with key metrics showing signs of growth even in the local residential market which has been under assault from Shaw Communications Inc. Blouin noted that residential line losses continue to decrease and have been for the past five quarters. Average revenue for bundled customers was up 3% in Q4 and churn was by 53% compared to customers who don't subscribe to bundles. "Overall, these results in the consumer division represent the best performance by a telco in North America facing a cable competitor in its incumbent territory," he said during the February 5 call. Bell Aliant is also fairing well against EastLink. Stephen Wetmore, president and CEO at Bell Aliant, noted the company is doing a good job of mitigating local residential line erosion. Revenue from local lines decreased 2.3% in Q4 compared to the same quarter in 2006, and this despite a greater decline in local access lines. Total line losses in Q4 were up slightly to about 42,000 from 37,000 in 2006. For the year, Bell Aliant lost 107,000 local line customers in 2007 compared to 66,000 in the previous year. "Despite a 3.2 per cent drop in customers, rate increases in certain markets and increased features penetration have contained the local and access revenue decline for the year to 1.7% for 2007," stated a Bell Aliant regulatory filing.The former Atlantic Canadian telco is also looking to grow its customer base in Ontario. Bell Aliant closed the acquisition of Kenora Municipal Telephone System (KMTS) late last week. The purchase adds approximately 11,000 new customers to its base and about $10 million to $15 million in annual revenue. (Network Letter will have more on the acquisition and the strategy behind it next week.)The country's largest telephone company Bell Canada, which is in the middle of a leveraged buyout led by the Ontario Teachers Pension Fund, demonstrated its righting-the-ship strategy is working. The company improved its local line losses for both the quarter and the full year compared to 2006, resulting from strong performance of its winback initiatives. Residential lines decreased by 117,000 in Q4, compared to a decline of 149,000 in last year's Q4. For the full 12 months, local line erosion was down in 2007 compared to 2006 with Bell Canada losing 511,000 local telephony customers in 2007 compared to 535,000 in the previous year. The results were driven by continuing growth in customer winbacks as well as positive customer response to home phone packages and service bundles.

Telcos show signs of stemming the tide against cable

News | February 7, 2008

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