Canadian Telecommunications David Lee Jeremy Ma Raymond Xie Saurabh Suryavanshi
Contents • Canadian Telecommunications Industry • Manitoba Telecom Services (MBT-T) • Rogers Communications (RCI.NV.B-T) • TELUS Corporation (T-T)
Industry Characteristics Telecommunications Industry
Industry Overview • Communications Services Industry • Wired telecommunications (5171) • Wireless telecommunications (5172) • Resellers, Satellite, Other services (5173, 5174, 5179) • Cable and other program distribution (5175) • Major companies • Bell Canada Enterprise (BCE,) • Aliant (AIT, 53% owned by BCE) • Bell Nordiq (BNQ, 63% owned by BCE, IT) • TELUS (T) • Rogers Communications (RCI.NV.B, 86% owned by E. S. Rogers) • Manitoba Telecom Services (MBT)
Industry Key Players Wireless & Paging $9.5 Bilion Wired Line Long Distance Internet / Data $23.3 Billion Wired Cable DTH/MDS $5.9 Billion 2004 Revenue $40.0 Billion Communications Resellers & Others $1.3 Billion
Industry Characteristics • Large contribution to economy • $40.0 billion (2004), $24.8 billion of revenue (1997 constant $) • 2.4% of total Canadian GDP • Highly capital intensive • Effective cap-ex management and allocation (Long term) • Saturated market • Increasing unit revenue Service development capability • Reducing costs Organizational efficiency • Market penetration Marketing as a key factor • Blurred Boundaries with Cable industry • Traditionally tough regulations greatly reduced • Cablecos with VoIP vs.Telcos with IPTV Strategic position
Industry Characteristics Wireline Communications Services
Wireline CommunicationsSegment Overview • ILECs: Incumbent Local Exchange Carriers • Used to be regional monopoly with own network • BCE, TELUS, MTS, SaskTel, Aliant, NorthwesTel • CLECs: Competitive Local Exchange Carriers • Allowed in 1997, if registered with CRTC • However, hard to compete with ILECs • Allstream (acquired by MTS), Call-Net (Sprint), ExaTel, EastLink • Resellers • Rent networks from ILECs or CLECs • Marketing with competitive rates more actively with Long Distance • Competition between BCE & TELUS • Since 2000, TELUS expanding to eastern Canada to become No. 2 • BCE reacting to successfully expand to western Canada
Wireline CommunicationsTelecommunications Carriers • TELUS to East / BCE to West since 2000
Wireline CommunicationsCompetitive Landscape • Wireline Local Services • ILECs dominating the market 97.3% • CLECs not able to compete with ILECS • Gradually declining due to • Customer migration to wireless • Reduced demand of 2nd phone line • Wireline Long Distance Services • ILECs monopoly eliminated in 1992 • CLECs and resellers effectively competing with over 26% share • Rapidly shrinking with revenue $5.5 B in 2004 • Alternative communications replacing the service • Wireless and text messaging (SMS) • Email, Instance messaging & Voice chatting • Internet and cable telephony (VoIP)
Industry Characteristics Wireless Communications Services
Wireless CommunicationsSegment Overview • Dominated by Big 3 • Rogers & Microcell 35.3% • TELUS Mobility 29.4% • Bell Mobility 27.2% • Profitability • Extreme competition lead by Microcell until early 2002 • With declining ARPU, industry recorded deficit in 2000, 2001 • Rogers leading the market after its Microcell acquisition in 2004 • Spectrum & Technology • Most Spectrum auctioned in 2001 ($1.5 B) BCE, Rogers, TELUS • Most carriers completed 2.5G (1X CDMA or GSM/GPRS) • Bell & Rogers leading 3G transition Important for service development (Increased ARPU, marketing)
Wireless CommunicationsRevenue & ARPU, 1999 - 2004 Industry deficit
Industry Characteristics Internet & Data Services
Internet & Data Services Segment Overview • Large Telcos & Cablecos • Able to utilize existing telephone and cable line • Telephone access line: 20 million • Wired cable line: 10.7 million (76.5% households) • Requires minor modification and modem • CLECs and Resellers • Usually provide services on rented network basis • Compete based on the rate • Offer additional services (web hosting, long distance service …) • Market Share & Trend • Dial-up: 27.2% • Digital Subscriber Line (DSL): 34.4% • Cable line: 39.4% • DSL & Cable line consistently increasing • Satellite and Wireless internet services starting to grow
Internet & Data Services Market Share, 2003 No. 2 No. 3 No. 4 No. 1
Industry Characteristics Margin & Network Investment
TelecommunicationsOperating Margin, Cap-Ex, 1998-2004 High speed Internet 2.5G
Industry Characteristics Telcos (IPTV) vs. Cablecos (VoIP)
VoIP vs. IPTV Technology Overview • VoIP: Voice over Internet Protocol • Stable technology with satisfactory Technology • Requires relatively small bandwidth • Uses public Internet network • In service by major Cable companies (Shaw, Rogers) • IPTV: Internet Protocol Television • New technology developed by Microsoft • Requires broad bandwidth • Technologically advanced compared to traditional digital TV • Showing fast penetration (MTS 18% in less than 2 years) • Competitive Implication • Telcos & Cablecos compete head to head • 20 – 25% of each market expected to be lost • More impact on Telecoes than Cablecos
VoIP vs. IPTV Impact on Competition between Cablecos & Telecos Telcos’ Exposure Cablecos’ Exposure
Manitoba Telecom Jeremy Ma
Table of Contents • Company Overview • Company Analysis • Financial Analysis MTS Extensive fibre optic network: spans more than 24,300 km.
Company Overview • Third largest telecommunication provider in Canada • Operate through two divisions: national and Manitoba division Provide Voice, Data, Video to residential and business customers in Manitoba.
MTS History • 1997 Manitoba Telecom Service became a public traded company • 1999 Strategic alliance with Bell • 2000 Initiate broadband service in Manitoba • 2004 End strategic alliance with Bell in Western Canada • 2004 Acquired Allstream ($1.6 billion) and become the 3rd largest national telecom provider in Canada • 2004 MTS Allstream strategic alliance with BT: broaden its IP based technology service globally • 2005 MTS Allstream acquired Delphi Solutions Corp. • 2005 Pierre Blouin named new Chief Executive Officer of Manitoba Telecom Services Inc. and MTS Allstream Inc.
Company OverviewManagement Team Pierre Blouin CEO 2005~ • a seasoned telecommunications executive, who spent 20 years + at BCE Inc. • 2003 ~ 2005 Group President, Consumer Markets, Bell Canada • 2002 ~ 2003: CEO of BCE Emergis • 2000 ~ 2002President and CEO of Bell Mobility Wayne S. Demkey, CA CFO 2001~ • Joined MTS since 1996. • 11 years as senior managers at KPMG Kelvin A. Shepherd, P.Eng. President, MTS (Manitoba) 2006~ • CTO of MTS 2000 ~ 2005 • 20 years with Saskatchewan Telecom John A. MacDonald President, MTS (ALLSTREAM) 2002 ~ • CEO of Leitch Technology Corp. • Executive Vice President, CTO, COO, President of Bell Canada 1994 ~ 1999
MTS Manitoba Leading telecom co. in Manitoba:Voice, Data, and Video
MTS Manitoba • MTS Manitoba continues to dominate Manitoba market even though it had faced competition from Rogers, Telus, and Shaw. • How has MTS remained dominant?
MTS ManitobaPreemption Strategy: MTS Bundles Objectives • Preempt cable triple play • Increase subscriber spending • Cross-selling Strategy • Full service: voice, data, and video • Attractive pricing (Bundle Pricing) • Competitive against cable
Results • Steadily gaining market share in wireless, TV, and high-speed internet. • Increase its revenues and customer base by cross-selling Shaw Fight Back! • Introduced its bundle packages in July 2005
MTS Manitoba Operation Performance Shaw launched bundle program
History of Allstream • 1846 Montreal and Toronto Magnetic Telegraph Co. established • 1846~ 1992 merger & acquisition Change name to Unitel • 1992 Enter Long distance market • 1996 Unitel AT&T Canada Long Distance Services • 1999 Enter IT service; first to offer MPLS-IP VPNs in Canada • 1999 Enter local phone service; reached 100,000 local business lines • 2003 Allstream brand launched • 2004 MTS acquired Allstream • 2005 Acquire Delphi Solution Corp.
Today’s Allstream Core Business • Provide specific or integrated e-Business solution to business clients Target market • midsized to large size enterprise business, as well as the public sector Market Segment (by industry) • Financial • Government • Manufacturing • Healthcare • High-Tech / Telecom • Energy
Allstream Client Base ….and many many more Canadian enterprises have chosen Allstream for e-business solution