Telus shines in Gartner study of telco health

Telus was among eight companies profiled by Gartner in a recent study titled “North American Carrier Health Improves,” and things are looking up for the carrier.

Margaret Schoener, principal analyst for Gartner in its operations and strategy group, says that Telus came first according to the research firm’s baseline weighting scheme. In this scenario financials are weighted at 40 per cent, investor valuation 20 per cent, future investment 15 per cent, cash flow 10 per cent, debt 10 per cent, and efficiency five per cent.

Needless to say, this is an analysis of strategic operations with a focus on financials and doesn’t directly address technology issues. Also included in the study were Bell South, Bell Canada Enterprises, Verizon, Quest, Alltel, Sprint/Nextel, and AT&T. Rogers was excluded on the Canadian side, as it was not considered a “traditional” telco, though it would seem such distinctions are increasingly moot.

Bell Canada didn’t grab top spot in any categories. Ms. Schoener, who didn’t comment on the possible effects of the Ontario Teachers’ Pension Plan takeover of Bell, pointed out that Telus’ strength was well-distributed.

“If investor value is removed and the focus is only on internal operations, Telus comes in first again,” says Schoener.

As with many such projects, there is a degree of subjectivity, something Schoener referred to as being “a bit of an art.” For example, financials were assessed over the current year, and value creation was purely investor-based over three years. Cost efficiency was also tracked over three years, with capital investments spanning five years. Each provider was then rated against the median performance of its peer group. Perry Hoffman, editor of the Network Letter and wireless editor for Decima Reports, says that in many ways Bell is getting the short end of the stick.

“They’re not as bad as they’re made out to be,” says Hoffman. “They’re the incumbent provider in the most heavily populated region in the country. They have a lot to lose, and everyone likes to beat up on Bell.” And is it losing? The Gartner report suggests it is. The best it could manage was a tie with Telus for operational efficiency.

Hoffman acknowledges that Telus is doing a lot of things right. “They’re focusing on wireless and winning in enterprise accounts in Bell’s territory,” he says, referencing Telus’ recent win of $213-million, five-year contract with the department of National Defence.

Telus would like onlookers to believe that this will be the trend, particularly given the $140-million, five-year contract from the government of Ontario announced near the end of 2006. John Wheeler, Telus’ vice-president for investor relations, sees this as payoff for a strategy begun in 2000.

“Our proportion of revenue generated by high growth wireless and data rose from 28 per cent in 2000 to 64 per cent today,” Wheeler wrote in an e-mail.

“The wireless portion is 45 per cent, which is much higher than most incumbent global telecoms.” Hoffman says changes in pricing for voice will alter the landscape in Canada, but he isn’t counting out Bell.

“They had some problems in ’04 when they migrated over to a new billing system, and of course now they’re going through the approval of the teachers’ bid. Bell can deliver on service, and in the end it’s all about service.”

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Jim Love, Chief Content Officer, IT World Canada

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