Teleglobe merges, eschews enterprises

Montreal-based Teleglobe International Holdings Inc. says its days as a service provider for enterprises are decidedly done now that the firm has merged with a U.S. carrier.

Instead of offering retail global voice and data connectivity to large businesses, as well as wholesale telecom service to carriers, the new Teleglobe will stick with the wholesale space alone. This is different from a former version of the international long-haul service provider, which used to sell both retail and wholesale products.

“We’re committed to the wholesale business,” said John Landau, a Teleglobe vice-president. “We’re not going to distract ourselves.”

Landau’s comments coincide with news that Teleglobe has completed its merger with Princeton, N.J.-based ITXC Corp., another wholesale service provider.

Landau said Teleglobe wanted to merge with ITXC because combined the companies would have a larger number of customers than either would alone, and because ITXC has expertise in voice over IP, a communication technology that is more efficient and flexible than are other connection methods.

Industry observers have said the merger is a smart move. Lawrence Surtees, a telecom analyst at IDC Canada Ltd., pointed out that Teleglobe wins a spot on the Nasdaq stock exchange by joining with the publicly traded ITXC. This might make it easier for Teleglobe to raise funds.

Annelise Berendt of Ovum Ltd., an IT consultancy, said the firms could combine their tech know-how to build innovative services. But she added that ITXC and Teleglobe would have to chop jobs to decrease overlapping human resources.

Landau said some sales and administration staffers would lose their jobs in the merger, although he wouldn’t provide a specific number. He added that to his knowledge the firm would maintain all workers at the Montreal headquarters.

Landau made a distinction between Teleglobe International Holdings and an earlier company with a similar name. He said problems that the previous Teleglobe experienced wouldn’t impact the firm he works for.

That earlier iteration of Teleglobe was owned by BCE Inc., the Montreal communications company that also has Bell Canada in its portfolio.

BCE purchased Teleglobe in 2000, but by 2001 telecom industry was in the midst of a capacity glut: too many carriers, not enough customers. Teleglobe’s global connections seemed less of an asset and more of an albatross around BCE’s neck.

The firm turned off Teleglobe’s long-term funding tap in 2002. The global carrier went to court looking for creditor protection. It chopped 850 jobs, nearly half of its workforce, and started hunting for new financial backers.

Last summer Teleglobe International Holdings, buoyed by investment companies Cerberus Capital Management LP and TenX Capital Partners LLC, purchased Teleglobe’s wholesale assets, and moved to merge the acquisition with ITXC.

Landau said the new Teleglobe would prove to customers that the company is stable. It would provide good service, stay focused on one market, wholesale, and keep the books open to public scrutiny.

The BCE-owned Teleglobe is gone, but its woes continue. Legal matters, such as a recently reported lawsuit against BCE and former Teleglobe executives, are ongoing.

Landau said those proceedings have little to do with Teleglobe International Holdings.

“That lawsuit is the Teleglobe estate, which is a totally separate entity from the new Teleglobe. Unfortunately I gather its name is still Teleglobe, but not Teleglobe International Holdings Ltd. There’s really no relationship at all.”

— With files from Lindsay Bruce, IT World Canada

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