Enterprise customers of Montreal’s BCE Inc. subsidiary Bell Canada could soon see their communications traffic being migrated to Teleglobe Inc. and away from MCI WorldCom Inc., say analysts.
Though Bell Canada only began a contract early last year to use MCI’s international network for its larger customers’ voice and data services – such as 1-800 numbers and frame relay service – BCE will likely want to move revenues gained from these customers to its poorly performing international carrier Teleglobe Inc. as soon as possible, suggested the analysts.
“I’m not sure in terms of timing, but I would expect by the end of this year most of the traffic would be on Teleglobe,” said Dvai Ghose, an industry analyst with CIBC World Markets in Toronto.
Ghose said the increased revenues would help Teleglobe, but that it would not be enough to lead the company into the black.
BCE Inc. reported a net profit of $4.8 billion for the year 2000 last month, but it took a $31 million hit in its final quarter after the $7.6 billion purchase of Teleglobe in November.
Teleglobe, a former crown corporation now based in Reston, Va., already carries most of Bell Canada’s long distance traffic, but it is in the midst of spending $5 billion over the next five years to improve its international network. Dubbed GlobeSystem, the IP-based network initiative is designed to deliver an integrated Internet, data, video and voice network.
That capital outlay comes only two years after the company spent $3.1 billion to purchase Excel Communications Inc., which at the time ranked fifth in the U.S. in long distance revenue next to giants AT&T, MCI, Sprint Corp. and WorldCom Inc. (MCI and WorldCom later merged).
Lawrence Surtees, a telecommunications analyst with IDC Canada Ltd. in Toronto, said Teleglobe’s financial results look bad because of the two network expansions. But he feels both purchases will make sense in the long run.
“I kept asking why Jean (Monty, BCE’s CEO) let Teleglobe buy Excel, and what did he want in Excel?,” Surtees recalled. “He wanted their U.S. network.”
Surtees pointed out that Bell Nexxia, which is part of the Bell Canada family, was not just a national broadband network but also U.S.-wide. Bell Nexxia’s U.S. network has since been married to Excel’s.
Surtees also suggested the Bell Canada-MCI WorldCom contract, which was a continuation of MCI WorldCom’s previous agreement with Stentor (the former alliance of Canada’s regional telecommunications carriers), was effectively killed after U.S.-based SBC Communications Inc. bought 20 per cent of BCE Inc.
“Now put your American hat on, and look at the American market,” Surtees said. “Doesn’t SBC compete against MCI WorldCom?”
CIBC’s Ghose rejected concerns that there may be consumer disruption if BCE moves its customers’ traffic to Teleglobe’s data-centric network from MCI’s more traditional network.
“MCI WorldCom is moving to an IP network anyway,” Ghose said. “I don’t think there will be any significant change in quality.”
A Bell Canada spokesperson would not confirm if the company planned to move off MCI’s network when the contract between the two companies is over. There are unconfirmed reports that the contract still has two years left, but neither BCE nor MCI would return calls to confirm this figure.