Consolidation with potential

Rogers Communications has been a major player in the Canadian telecom market for years through its wireless phone business. While enterprise businesses often used Rogers as part of their employee mobile plans, Rogers didn’t play a significant role in the enterprise telecommunications market because the Toronto-based media giant didn’t have a wireline network that reached many businesses. With Rogers’ acquisition of Call-Net Enterprises earlier this month however, that changed to the potential benefit of both enterprises and consumers.

Normally market consolidation isn’t a good thing. It results in fewer players, less choice and the distinct possibility of higher prices.

For enterprises though there’s no shrinking of the market in Rogers’ purchase of Call-Net, the company that operates as Sprint Canada, since Rogers didn’t offer enterprise-class wireline services before the acquisition.

Instead what enterprises get is a potentially stronger Call-Net, which now has the backing of one of Canada’s largest (and also admittedly most debt-laden) companies.

The $330-million purchase of Call-Net gives Rogers 600,000 business and residential customers. More importantly though it also gives Rogers a national fibre network, support staff accustomed to dealing with telecommunications problems and a sales and services team that knows how to sell into the business market.

With the combined resources of Rogers and Call-Net, the new company should be able to go head-to-head with Canada’s other major telecom carriers such as Bell Canada, Telus and MTS/Allstream. There are also significant opportunities for bundling by the two companies with the combination of Call-Net’s existing enterprise offerings and Rogers’ wireless services.

If there is a concern about the Call-Net acquisition, it is that Rogers may have little interest in Call-Net’s enterprise customers.

Rogers, which has already begun selling residential phone service over its cable network, is clearly more interested in sticking with its core market, which is consumers. Rogers has already said it plans to move some of Call-Net’s residential customers onto Rogers’ own digital phone service in markets where that’s possible.

If Rogers is only interested in sticking to the consumer market, the company will hold onto Call-Net’s call centre personnel and unload any Call-Net assets that aren’t tied to consumer service.

Even if this happens though Call-Net’s enterprise customers won’t be left up in the air for long. There are still plenty of companies out there that would love to have Call-Net’s enterprise customer base and would ensure an orderly transition from one carrier to another to keep the enterprises’ business.

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