BCE Inc. plans to extend its global communications reach by acquiring the remaining outstanding common shares in international telco carrier Teleglobe Inc.
The $9.65 billion purchase of the 199.4 million common shares BCE does not own creates a global Canadian full service communications company, outfitting BCE with an international network for data services and e-commerce.
“In respect to the telecom market, it will give them (BCE) 100 per cent of an international carrier, which has facilities around the planet and more importantly, we think, in and around the United States,” said managing director for The Yankee Group in Canada, Iain Grant.
“This virtual equity they’re giving away is table stakes in a poker game, which sees BCE regain some sort of global status, which they’ve forgone by giving away Nortel,” Grant said. “BCE has gone from a potential player on that global scene to a small regional company with operations that stretch from Brandon, Man. to Moncton, N.B.”
Montreal-based BCE, Canada’s largest communications company, offers Canadian residential and business customers a suite of telecommunications services. Through Bell Canada International’s investee companies, BCE provides communications services to over 4 million customers in Asia and Latin America, and now BCE’s ownership in Teleglobe gives it an even greater international presence.
“The acquisition of Teleglobe will propel BCE into the global arena and greatly expand our opportunities for growth,” said Teleglobe chairman and BCE president and CEO, Jean C. Monty.
Teleglobe will bring an international perspective to BCE’s communications services, providing BCE with an extensive data/Internet network with direct connections to businesses in 100 countries, Monty said. “It will open the world to our growth-oriented Internet and e-commerce companies as they pursue expansion beyond Canada.”
However, according to Grant, BCE must look beyond the 100 country expansion the acquisition of Teleglobe will bring. He said that BCE must look at expanding its strategic relationships with bigger, international telco carriers in order to stay competitive.
Grant sees an affiliation with French-speaking France Telecom as “a potential marriage made in heaven,” adding that the only hole in France Telecom’s global market strategy is that it has no presence in North America.
“Teleglobe has connectivity to 110 countries or some such number. So does everybody else,” Grant said. “Teleglobe’s network however, is much smaller than everybody else. If France Telecom has a 747 flying to Bombay, we’ve got a DC3,” he chuckled. “We’re all serving Bombay, but we’re serving it differently.”
The deregulation and liberalization of the international telecom market and the transition from a traditional voice business to data and Internet, resulted in Teleglobe’s recent disappointing financial performance, according to Monty.
“These changes have been a challenge for all established players including Teleglobe,” he said. “As part of the BCE group of communications companies, Teleglobe’s position will be strengthened and it will be better placed to realize its goal of becoming a global data/Internet company,” he added.
BCE will continue to support Teleglobe’s instituted five-year Internet infrastructure program, GlobeSystem. According to Monty, “work is well advanced on a business plan to improve Teleglobe’s profitability and enable it to reach its full growth potential.”
Teleglobe’s present program is going to enhance its ability to carry traffic by some 20-to-200 times, said Grant. “That will put it back up on the radar screen with everybody else.”
However, he stressed the purchase was more “a bargaining chip for BCE to re-enter the world telecommunications scene, as a ‘player’ as opposed to an observer.”
“I look at the BCE investment in the company basically reshaping what Teleglobe was and what it was trying to do,” he continued. “Taking advantage of some of the BCE strategic relationships and refocusing Teleglobe in a different way and in a different area.”
“It (BCE) has to grow and become something greater than just a Canadian telephone company, or soon become a subsidiary of somebody else,” concluded Mr. Grant.
The transaction is still subject to legal, regulatory and Teleglobe shareholder approvals in both Canada and the United States, but BCE expects the transaction will close as soon as possible.