Bell Canada
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| BCE Inc. | |
|---|---|
 |
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| Type | Public (TSX: BCE, NYSE: BCE) |
| Founded | 1880, by Charles Fleetford Sise |
| Headquarters | Montreal, Quebec, Canada |
| Key people | Michael J. Sabia (President) |
| Industry | Communications Services |
| Revenue | ▲$20 billion CAD (2007)[1] |
| Operating income | ▲$4 billion CAD (2007) |
| Employees | 54,434[2] |
| Website | bce.ca |
Bell Canada Enterprises (TSX: BCE, NYSE: BCE), legally BCE Inc., is a major Canadian telecommunications company. Through its subsidiaries including Bell Canada, Bell Aliant, Northwestel, Télébec, and NorthernTel, it is the incumbent local exchange carrier for telephone services in most of Canada east of Manitoba and in the northern territories, and a leading competitive local exchange carrier (CLEC) in the western provinces. In a majority of its service territory, Bell Canada's principal competition is Rogers Communications. Bell Canada currently services over 13 million phone lines, and functions under the umbrella brandname "Bell". The current president of the group is Michael Sabia. BCE ranks number 224 on the Forbes Global 2000 list (2008 edition).
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[edit] History
Historically, Bell Canada has been one of Canada's most important and most powerful companies, and in 1975 was listed as the fifth "largest" in the country.[3]
[edit] Inception
Alexander Graham Bell, who vacationed most of his life in Nova Scotia, Canada, received a US patent (#7,789) for the telephone in 1877. Bell assigned 75% of the Canadian patent rights to his father, Melville Bell, who, with a friend, Reverend Thomas Henderson, leased pairs of wooden hand telephones for use on private lines constructed by the client from, for example, a store to a nearby warehouse or from a business to an executive's residence. In 1879 Melville Bell sold the rights to National Bell Telephone Company in Boston, Massachusetts, USA, and thus officially became one of the first regional operating companies of what was to become the Bell System. Charles Fleetford Sise, a Chicago businessman, was brought in as general manager, and The Bell Telephone Company of Canada Ltd. was founded in 1880.[4] With a government-granted monopoly on Canadian long-distance telephone service, The Bell Telephone Company serviced 237,000 subscribers by 1914.
Since the early years of The Bell Telephone Company of Canada, Ltd., it was known colloquially as "The Bell" or "Bell Canada." On 7 March 1968 Canadian law renamed The Bell Telephone Company of Canada, Ltd., as Bell Canada.
[edit] Competition and territory reduction
Bell Canada originally extended lines clear from Nova Scotia to the foot of the Rocky Mountains in what is now Alberta. However, most of the attention given to meeting demand for service focused on major cities in Ontario, Quebec, and the Maritime Provinces.
During the late 19th century, Bell sold its Atlantic operations in the three Maritime provinces, but acquired interests in all Atlantic companies during the early 1960s. It held interests in the parents of NBTel, Island Telecom, NewTel, and MTT. These four companies later merged into Aliant in the late 1990s, in which Bell continues to own a stake.
Independent companies appeared in many areas of Ontario, Quebec and the Maritime provinces without adequate Bell Canada service. Bell went on during the 20th century to acquire most of the independent companies in Ontario and Quebec. Quebec, however, still has large swaths of relatively rural areas served by Telus and Télébec as well as some 20 small independent companies. As of 1980, Ontario still had some 30 independent companies, and Bell has not acquired any; the smaller ones were sold to larger independents with larger capital resources.
The three prairie provinces, at separate times up to 1912, acquired Bell Canada operations and formed provincial utility services, investing to develop proper telephone services throughout those provinces; Bell Canada's investment in the prairies had been scant or insufficient relative to growth. Having achieved a high level of development, Manitoba moved to privatize its telephone utility and Alberta privatized Alberta Government Telephones to create Telus in the 1990s. Saskatchewan continues to own SaskTel as a crown corporation. Edmonton was served by a city-owned utility that was sold to Telus of Alberta in the 1990s.
British Columbia, served today by Telus, was served by numerous small companies that mostly amalgamated to form BC Tel (the last known acquisition was the Okanagan Telephone Company in the late 1970s), which served the province from the 1960s until its sale to Telus. (The amalgamations produced one anomaly: Atlin is surrounded by the territory of Northwestel, implying that the company that established service there was acquired by a company serving territories further south.)
Although Bell Canada entered the Northwest Territories with an exchange at Iqaluit (then known as Frobisher Bay, in the territory now known as Nunavut) in 1958, Canadian National Telecommunications, a subsidiary of Canadian National Railways, provided most of the telephone service in Canada's northern territories. CNR created Northwestel in 1979, and Bell Canada Enterprises acquired the company in 1988 as a wholly owned subsidiary. Bell Canada sold its 22 exchanges in the eastern region of the NWT to Northwestel in 1992, and BCE transferred ownership of the company to Bell Canada in 1999.
[edit] Divestiture and deregulation
The Bell System had two main companies in the telephone industry in Canada: Bell Canada as a regional operating company (owned by and affiliated with AT&T until 1956) and Northern Electric as an equipment manufacturer (owned by and affiliated with Western Electric until 1956, which itself was also affiliated with Nippon Electric in Japan until 1956). The Bell Telephone Company of Canada and Northern Electric were structured similarly in Canada to the analogous portions of the Bell System in the United States; the regional operating company (Bell Canada) sold telephone services as a local exchange carrier, and Western Electric (Northern Electric) designed and manufactured telephone equipment.
Because of the 1956 break-up of the Bell System to which AT&T and the United States Department of Justice consented as a resolution of an antitrust lawsuit filed in the United States in 1949, AT&T and the Bell System proper divested Northern Electric and Bell Canada. Northern Electric renamed itself Northern Telecom in 1976, which in turn became Nortel Networks in 1998 with the acquisition of Bay Networks.
Bell Canada acquired 100 percent of Northern Electric in 1964; starting in 1973, Bell's ownership stake in Northern Electric was diminished through public stock offerings, though it retained majority control. In 1983, as a result of deregulation, Bell Canada Enterprises (later shortened to BCE) was formed as the parent company to Bell Canada and Northern Telecom. As a result of the stock transaction used by Northern Telecom to purchase Bay Networks, BCE ceased to be the majority owner of Nortel, and in 2000, BCE spun out its share of Nortel, distributing its holdings to its shareholders.
Between 1980 and 1997, the federal government fully deregulated the telecommunications industry and Bell Canada's monopoly ended. Today Bell Canada itself provides local phone service only in major city centres in Ontario and Quebec.
[edit] Convergence strategy / Internet boom and bust
When Jean Monty assumed the job of CEO in 1998, he pursued a convergence strategy, attempting to combine both content creation and distribution within BCE, and to take greater advantage of the emerging Internet market. BCE Emergis was formed to market e-commerce solutions. Capitalizing on the success of its Internet service provider division, Sympatico, in 1999 BCE formed a partnership with Lycos to create an Internet portal for its customers.
Shortly after the AOL - Time Warner merger, BCE purchased the CTV television network in 2000. In 2001, BCE acquired control of The Globe and Mail, and combined it with CTV and the Sympatico-Lycos portal, its other content creation assets, to form Bell Globemedia. The desired synergies did not occur and the portal was sold back to Bell Canada in 2002. Bell Globemedia was highly profitable, however, and it was spun out as a separate company in August 2006. The new company assumed the name CTVglobemedia in 2007.
In 2000, BCE acquired control of Teleglobe, an overseas carrier coveted by Bell since the early 1980s. The acquisition was a disaster as BCE lost billions of dollars financing Teleglobe. In 2002, BCE sold Teleglobe, and Jean Monty resigned.[5] Michael Sabia subsequently assumed the position of CEO.
[edit] Post Teleglobe: Refocus on core business
Michael Sabia refocused BCE on its core telecommunications business, prompting BCE to buy back the 20% share in Bell Canada that it had sold in 1999 to Ameritech (which was subsequently acquired by SBC).[6] BCE also spun off operating units that it did not consider to be core to its business, including Emergis in 2004, and Bell Globemedia and Telesat Canada in 2006.
On February 1, 2006, stating the need to remain competitive, Bell Canada announced job cuts of 3,000 to 4,000 employees by the end of 2006.
On April 28, BCE announced that CEO Michael Sabia was taking a 555% pay increase, his salary being raised from $1.21 million CAD a year to $6.71 million CAD a year. The pay included a $1.25 million CAD salary, a $2.2 million CAD bonus that Sabia converted to deferred share units, a long-term incentive payout of $3 million CAD and other compensation, the filing shows. Bell Canada also posted record revenue increases for the previous fiscal year.
Under pressure from investors, on October 11, 2006, BCE announced it would be wound down, with its remaining assets converted to an income trust. The new entity was planned to be named "Bell Canada Income Fund". As part of this restructuring, Bell Aliant offered to take Bell Nordiq private, while remaining separate from the new Bell trust.[7] Due to announced changes in taxation law by the Canadian federal government, on December 12, 2006, BCE announced it would not proceed with its planned conversion to an income trust, but would go ahead with its plans to simplify the corporate structure and eliminate the BCE holding company. On June 6, 2007, BCE shareholders approved renaming BCE Inc. to Bell Canada Inc.[8] Bell plans to have two operating business units: Bell and Bell Aliant Regional Communications.[9]
On April 30, 2007, the Canadian Radio-television and Telecommunications Commission (CRTC) announced its decision to allow pay phone rates for Bell Canada, Telus, Bell Aliant, SaskTel, and MTS Allstream to increase from 25 cents to 50 cents, starting as early as June 1. The CRTC also permitted local rural rates to increase by the lesser of the annual rate of inflation or five percent, and removed price caps on optional rural services, such as call display and voicemail.[10] On June 2, 2007, Bell Canada increased the cost of a local pay phone call to 50 cents when paid in cash and one dollar when paid by calling card or credit card,[11] Bell's first increase in pay phone rates since 1981.[10]
[edit] Acquisition by the Ontario Teachers' Pension Plan
Due to its stagnant share price, starting in April 2007, BCE was courted for acquisition by pension funds and private equity groups, including a consortium led by the Canada Pension Plan Investment Board (with Kohlberg Kravis Roberts as one of the participants), a consortium led by the Ontario Teachers' Pension Plan, and a consortium that included Cerberus Capital Management.[12]
On June 30, 2007, BCE accepted a bid of $42.75 per share in cash, for a total valuation of $51.7 billion, from the group led by the Ontario Teachers' Pension Plan, and including Providence Equity Partners, Madison Dearborn Partners, Merrill Lynch Global Private Equity, and Toronto-Dominion Bank. The proposed deal is the largest acquisition in Canadian history and the largest leveraged buyout ever. [13] [14] BCE shareholders approved the sale on September 21, 2007.[15] The transaction would give the OTPP effective control of Bell's 15% share in CTVglobemedia, thus bumping OTPP's share up to 40%, putting it at parity with The Woodbridge Company.
On March 27, 2008, the CRTC approved the Ontario Teachers' Pension Plan takeover of Bell Canada, subject to certain conditions for its corporate governance structure to ensure that Bell remains under Canadian control.[16] The proposal awaits approvals of other authorities, including the Financial Services Commission of Ontario and Industry Canada.
[edit] Financial and legal obstacles
Due to the tightening of the credit market, caused by the subprime mortgage crisis, the investment banks financing the deal — led by Citigroup, Deutsche Bank and the Royal Bank of Scotland — started negotiations on May 16, 2008, to revise the terms of the loans with higher interest rates and greater restrictions to protect themselves.[14]
The Quebec Court of Appeal blocked the sale of BCE on May 21, 2008, ruling that BCE failed to adequately consider the effect on its bondholders of its sale and the CAD $30 billion debt that would be assumed.[17] The Supreme Court of Canada agreed to hear BCE's appeal and scheduled a hearing date on June 17, 2008.[18]
[edit] Project Cleanfeed Canada
In November 2006, Bell, Bell Aliant, MTS Allstream, Rogers, Shaw, SaskTel, Telus, and Videotron, in conjunction with cybertip.ca (a nationwide tipline for reporting the online sexual exploitation of children), announced the creation of Project Cleanfeed Canada, an initiative designed to block access to child pornography sites. It is based on a similar program introduced by British Telecom in 2004.[1] Project Cleanfeed Canada uses an encrypted blacklist of known child-pornography sites operating outside the country and targets only those sites that offer images of prepubescent children.
However, some critics denounce the initiative, saying that this amounts to nothing more than internet censorship. [2] Others argue that it is a risk worth taking.[3]
[edit] Current operations
The BCE subsidiary Bell Canada has moved into new industries via new divisions such as Bell Sympatico, an Internet service provider; Bell Mobility, a cellular wireless service now operating in most Canadian provinces; Bell ExpressVu, one of Canada's two national satellite television providers; Bell Home Monitoring, a new division announced in February 2007; and Bell Distribution.
BCE also owns 15% of CTVglobemedia, one of Canada's largest privately held media companies which owns the CTV television network, A-Channel and The Globe and Mail, a national newspaper, as well as other (primarily television) media assets.
In July 2006, Bell and former subsidiary Aliant completed a restructuring whereby Aliant, renamed Bell Aliant Regional Communications, took over Bell's wireline operations in much of Ontario and Quebec (while continuing to use the "Bell" name in those regions), as well as its 63% ownership in rural lines operator Bell Nordiq (a publicly traded income trust that controls NorthernTel and Télébec). These are in additional to Aliant's most of operations in Atlantic Canada. In turn, Bell has assumed responsibility for Aliant's wireless and retail operations. Bell Aliant, now itself an income trust, is currently 73.5% owned by Bell.
Other company assets include satellite systems integrator Telesat Canada, Western Canada CLEC Bell West, and a 29% minority stakes in IT service provider CGI. All in all, BCE partially or fully owns 17 companies in the fields of telecommunications, media, and information technology. e-Business unit Emergis was spun off in 2004.
Shifting its focus to IP, Bell has in recent years deployed MPLS on their nationwide fibre ring network in anticipation of upcoming consumer and enterprise-level IP applications, such as IPTV and VoIP.
[edit] Corporate governance
Current members of the board of directors of Bell Canada Enterprises are: Richard Currie, André Bérard, Ronald Brenneman, Anthony Fell, Donna Kaufman, Brian Levitt, Edward Lumley, Judith Maxwell, John McArthur, Thomas O'Neill, Jim Pattison, Robert Pozen, Michael Cora, Paul Tellier, and Victor Young.
[edit] See also
- Bell Tower, a skyscraper in Edmonton
Former BCE units:
- Teleglobe Canada Inc - now VSNL International Canada
- Nortel - formerly Northern Telecom and Northern Electric
[edit] References
- ^ BCE Annual Report. Retrieved on 2006-06-29.
- ^ BCE: Profile for B C E INC. Retrieved on 2007-12-08.
- ^ The Top 200 - Canada's Largest Companies c1973-74 - Business
- ^ About BCE — History. BCE Inc.. Retrieved on 2007-06-30.
- ^ Macklem, Katherine (2002-05-06). Monty quits as BCE CEO (HTML). Maclean's Magazine. Retrieved on 2007-06-29.
- ^ BCE, Inc. (2002-06-28). "BCE to Own 100 per cent of Bell Canada". Press release. Retrieved on 2007-06-29.
- ^ BCE to be wound down, Bell Canada to convert to income trust, BCE press release, October 11, 2006
- ^ United States SEC filing, June 12, 2007, Form 6-K. Securities and Exchange Commission (2007-06-12). Retrieved on 2007-06-30.
- ^ BCE, Inc. (2006-12-12). "Bell announces 2007 business outlook - Improving revenue and EBITDA growth in 2007 guidance". Press release. Retrieved on 2007-01-11.
- ^ a b Hello? The 50-cent pay phone call is coming (HTML). Canadian Broadcasting Corporation (2007-04-30). Retrieved on 2007-12-14.
- ^ Bell's pay phone price increases to 50 cents Saturday (HTML). Canadian Broadcasting Corporation (2007-06-01). Retrieved on 2007-12-14.
- ^ Telus's exit likely to pull down price of BCE bids (HTML). Reuters (2002-06-27). Retrieved on 2007-06-29.
- ^ Teachers win BCE bid (HTML). CanWest News service (2007-06-30). Retrieved on 2007-06-30.
- ^ a b Sorkin, Andrew Ross & de la Merced, Michael J. (2008-05-19), “Banks’ Terms Imperil Deal to Buy Out Bell Canada”, The New York Times, <http://www.nytimes.com/2008/05/19/business/worldbusiness/19deal.html>
- ^ BCE holders approve giant buyout (HTML). Toronto Star (2007-09-22). Retrieved on 2007-10-01.
- ^ CRTC approves BCE purchase with conditions (HTML). CNW Group (2008-03-27). Retrieved on 2008-04-03.
- ^ Austen, Ian (2008-05-22), “Bell Canada Takeover Is Blocked”, The New York Times, <http://www.nytimes.com/2008/05/22/business/worldbusiness/22bce.html>
- ^ Austen, Ian (2008-06-03), “Canada: Supreme Court to Hear Bell Case”, The New York Times, <http://www.nytimes.com/2008/06/03/business/worldbusiness/03fobriefs-SUPREMECOURT_BRF.html>
[edit] External links
- Bell Canada Official Website
- Bell Canada Enterprises
- Bell Telephone Company of Canada - public historical documents
- CRTC chart of Bell Canada's assets
- Operator. May I help you?: Bell Canada's 125 Years — Bell Canada's origins (illustrated with many early photographs)
- BCE and Aliant form one of North America's largest regional telecommunications service providers
- Bell Better home bundle
- Multi dwelling unit services from Bell
- TSX Stock Quote for BCE
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