Bell to launch new network

Company CEO says Telus's aborted merger with AT&T forced Bell's hand

Edmonton Journal, 24 April 1998
Paul Marck

Telus Corp.'s brief merger dalliance with AT&T Canada has led telecommunications giant Bell Canada to announce the formation of a new $750-million national company to serve business.

Bell said Thursday its new company will be launched by fall to provide high-speed data and Internet services to business customers over a national broadband network. It's expected the as-yet-unnamed company will generate $3 billion in revenues by 2001.

However, it's not offering any equity stake to its 10 partners in the Stentor provincial telephone monopolies.

Instead, Bell, which operates in Ontario and Quebec, has notified Stentor members of its plans and invited participation on a shared-revenue basis.

The Telus-AT&T merger attempt fell through last Friday after six months of talks. Bell Canada president and CEO John MacDonald admitted it was Telus's partnering attempt that threatened to break up the Stentor group. The merger talks threw a scare into Bell business customers who feared a big gap in coast-to-coast networking, MacDonald said. The new company was hatched as a contingency plan to guard against that, but it's also just good, business, McDonald said in a teleconference call.

"I think it's fair to say that after the Telus announcement, this was a heads-down discussion to ensure that we've got a solution to meet our customers' needs," MacDonald said. "It was really an outcome of that."

Even after Telus broke off talks with AT&T, the changing climate in telecommunications convinced Bell to go ahead anyway.

Bell won't offer equity stakes to any of the Stentor companies. The advantages are in shared network, equipment advances and development of new applications, MacDonald said. Economies of scale mean many of the smaller Stentor firms can't offer the same low-cost, efficient service as will the new Bell outfit.

"My belief is that some of the telecommunications companies have the same sort of growth aspirations,'' MacDonald said.

The reaction from Telus is guarded. But the Edmonton-based company is listening.

"We're interested in talking to Bell and seeing how the whole process will work out," said Jeff Welke, Telus external communications spokesperson.

In a related move, Bell said it has signed a $179-million agreement with Fonorola-Ledcor Industries consortium to acquire a fibre-optic network between Toronto and the West Coast to handle increased telecommunications traffic. Bell said its business-based Internet traffic is growing at the rate of 10 per cent a month.