New HSPA network ‘make or break’ for MTS Allstream, say analysts

MTS Allstream Inc.’s ability to survive in the telecommunications market is dependent on its ability to operate on a HSPA network, according to analysts. The Manitoba communications company, a wholly owned subsidiary of Manitoba Telecom Services Inc. and biggest player in the province, confirmed Thursday the launch of a high-speed packet access (HSPA) wireless network this year, staking its claim over the territory and potentially warding off new entrants. “Recently we have seen a lot of new players coming onto the scene in wireless. Hence the fear is that if they don’t make the move right now into HSPA, one of the newcomers, such as Wind Mobile, could come into the Manitoba market and go head-to-head against Manitoba Telecom,” Desjardins Securities analyst Maher Yaghi told The Wire Report. “That could destabilize the company’s profitability greatly.” MTS Allstream CEO Pierre Blouin said during a conference call with analysts Thursday that he expects no new wireless competitors to enter the Manitoba market this year. But analysts expect new entrants will enter the market in the next three to five years. “They are trying to tell people, ‘look, we are here, we are staking our foot in the market and we are going to do whatever it takes to fend off any new kind of competition,” Yaghi said. “For a newcomer to come in 2010 or 2011, the decision becomes a bit more difficult because you are going to have to fight a that owns 80 per cent of the market with the same products.” According to analysts, defending its wireless network is crucial if the company wants to preserve its stake in the Manitoba market. “The ability for this company to compete requires wireless, and therefore it may be the make or break for this company, three or five years down the road,” National Bank Financial analyst Greg MacDonald said in an interview. “For wireless companies not to do an HSPA overbuild, particularly in a market … it is becoming highly important. And not just to have the iPhone. Almost all of the marquee smart phones are getting developed in the HSPA format right now, and increasingly in LTE .” The new HSPA network is the result of a deal struck with Rogers Wireless in July 2009, allowing the two companies to share development and maintenance costs. The deal allows MTS Allstream customers to access the Rogers Wireless network using roaming when outside of its coverage. As part of its strategy for 2010, MTS Allstream will be launching a fibre to-the-home (FTTH) network in 2010. In the first part of the network rollout, FTTH technology will reach 500 homes in Waverley West, a new development in Winnipeg. “Telephone companies will increasingly deploy fiber to homes, and it’s probably to a point now when new homes built will have fiber to-the-home,” MacDonald said. FTTH technology allows customers to receive high-speed Internet access, but comes at a higher cost. “The FTTH network is the next evolution in advanced communication networks providing MTS the ability to maintain its competitive edge against the cable networks,” said a company release. “FTTH is also more effective in servicing new home developments as compared to existing hybrid fibre/copper technologies, which helps deliver both capital and operating efficiencies.” MTS Allstream’s FTTH network is expected to reach up to 3,000 homes, with a total investment of $15 million, the release said. But it may take over a year for the company to invest more money in FTTH as the company does not have enough capital investment and is tied up with its wireless venture, Yaghi said. The company will be expanding its fibre network, and launching new wireless offerings this year for business clientele. “While not expected to be a large play, our planned wireless offerings represent a niche opportunity, delivering growth while enhancing Allstream’s ability to expand and defend its existing wire-line revenue base,” MTS Allstream CFO Wayne Demkey said during the conference call Thursday. The offerings are expected to be more solution- than product-based, focusing on improving communications flexibility and productivity potential, MacDonald said. “When they talk about unique solutions, they are talking about solutions which may be a hybrid of wireless and wire-line together. It may be wireless only, but at the end of the day, large business companies aren’t just buying access anymore, they aren’t just buying a phone anymore, what they are looking for is a solution,” he said.

New HSPA network ‘make or break’ for MTS Allstream, say analysts

News | February 5, 2010

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