Experts offer advice for Bell Canada’s new owners

You get what you pay for, goes an old adage, and with no shortage of free advice on what the soon-to-be new owners of Bell Canada should do with the company, it’s hard to put a value on their words.

But now that shareholders have put their stamp of approval on the $51.7-billion privatization of the telecom giant, we asked three industry analysts what they’d tell the group that plans to run the company what to do with it.

It will be a tough task. “This isn’t just any privatization,” said Ed Daugavietis, senior networking analyst at Info-Tech Research of London, Ont. It’s not merely the biggest in Canadian history, it’s the biggest in the world.

And it isn’t quite a done deal. While shareholders approved the buyout on Sept. 21, as a reorganization it had to be ratified by a court on Oct. 10, still needs approval by Industry Canada and possibly the CRTC and the government of Quebec.

There’s speculation that it won’t be completed until early next year. The new team calling the shots will be lead by the Ontario Teachers’ Pension Plan, which will hold 52 per cent of Bell, Providence Equity Partners Inc. of Rhode Island, which will hold 32 per cent, and Madison Dearborn Partners of Chicago, which will hold nine per cent.

Financial analysts assume they’ll want to sell off profitable divisions to pay for the deal. Beyond that, our trio of experts had these words of advice. “They can’t play it safe,” said Daugavietis.

With landline subscribers — the utility’s cash cow until now — deserting for less expensive home phone and Internet offerings from cable companies and VoIP upstarts, Bell has to move faster into profitable or fast-growing markets such as professional and managed services for corporate subscribers and Web 2.0 technologies for residential users. The company has been doing that, he acknowledged, but “Teachers has got to spur that process along.”

Zeus Kerravala, a telecom analyst at the Yankee Group, would like to see Bell develop an interactive platform like Akamai Technologies of Cambridge, Mass., for delivering content and handling business transactions.

“They’ve got to look at what the younger generation and what’s going to be in demand, and if they want to capture some of that they’ve got to start building some of that infrastructure now,” he said.

Telcos Bell should be emulating include British Telecom (BT), with its so-called 21st Century network plan, and France Telecom, which has a good professional services division, he said.

Iain Grant, managing director of the SeaBoard Group, looks to the air. “First, they have to fix wireless,” he said. “It’s been driving incomes of Canadian telephone companies for the past couple of years. Bell’s been the last in the pile. So they have to fix their wireless machine.”

Recently it began an ad campaign touting its Solo prepaid service, which has some the lowest prices around, “but I don’t see it reaching beyond the clutter,” Grant said. “So I could goose the advertising. Get that message out. There’s a responsive wave in Canada that wireless prices are high, and they could ride that wave with its differentiated brand and probably capture share without cannibalizing things untowardly.”

It could also follow Europe’s lead and plunge into faster wireless technology such as UMTS. “Bell has a chance to leapfrog what’s happening in North America by bringing that next generation here,” he said. He also said Bell could better exploit technology gained in the Inukshuk high-speed wireless partnership with Rogers Communications.

Second, it needs to worry more about protecting its consumer base by bringing fibre directly to homes, as Verizon is doing in the U.S. Quebec’s Videotron has promised that by the end of this year it will bring 100Mbps Internet service to homes across the province, he said, while Bell is only offering 15Mbps to select areas. However, he acknowledged that moving to high speed wireless and installing last mile connectivity are extremely expensive.

On the other hand, Grant said there is an area Bell should continue doing more of the same. The enterprise wing is catching up to services offered by MTS Allstream, has all the Cisco certifications it needs and has a ubiquitous product.

“Of all Bell’s engines,” he said, “the enterprise has been clicking over most cleanly.”

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