Telus shut out of phone alliance

The Edmonton Journal, May 7, 1998

The country's largest telecommunications company is beginning to exact punishment on Edmonton's Telus Corp for daring to step out of line.

Jean Monty, the new chief executive officer of BCE Inc. (which owns Montreal-based Bell Canada) says that Telus Corp., the former Alberta Government Telephones, is being frozen out of all new initiatives developed by the Canadian telephone consortium known as the Stentor alliance.

"In practice, on new initiatives that is correct," Monty told Southam Mews after the company's annual general meeting in Toronto. "We are all aware now that on new initiatives that we'll invite some and maybe not others."

Telus lobbed a grenade in March when it announced it was seeking a controlling stake in AT&T Long Distance Services, which operates out of Toronto. Although the talks broke down two weeks ago, the move by Telus was views as a betrayal by its fellow telephone companies in the cross-country alliance. It appeared the Alberta telephone company wanted to unshackle itself from Stentor's restrictions - and its allies in the consortium - and compete directly against them for a slice of the $7-billion long-distance market in Canada.

Since then, Telus has been isolated from the table where the group of 11 telephone companies, including Bell Canada, BC Tel, Telus, Island Tel, SaskTel, QuebecTel, NorthwesTel, NB Tel, Manitoba Telecom Services, Maritime Tel&Tel and NewTel Communications, assemble to develop strategies.

In fact, the group is tolerating Telus insofar as it will only fulfill its existing contracts with the maverick company, such as co-ordinating pricing. However, the consortium will not likely renew Telus's membership in the alliance when those agreements expire.

"Telus has decided that they want to go beyond their provincial borders. And the alliance was set up so that we work together inside of our respective territories and maximize the relationship between us," said the 50-year-old Monty, who is also chief executive officer of Bell Canada. "They've decided that's not enough for them."

As a result, BCE (which also owns a number of smaller telephone companies in the Atlantic provinces) is laying the groundwork for what it expects will be a battle for Alberta. "We also have to take destiny in our hands and we have to start thinking that we may have to look at Alberta as an opportunity market," Monty said.

To do that, the Stentor group will need its own infrastructure to compete locally and in the long distance market in Alberta. To that end, BCE announced it had purchased $175 million worth of fibre optics, stretching from Toronto to the West Coast, from Fonorola Inc.

It's part of the so-called national broadband company established by BCE and its Stentor partners to provide high-speed data and Internet services to business customers coast to coast. "We'd never invite Telus into ownership of that," Monty said.

The failed negotiations between Telus and AT&T have done little to ingratiate the Alberta company, which has long been considered a renegade within the alliance. Especially when the takeover talks sparked rampant rumours about the eventual demise of the Stentor consortium and the fate of BC Tel, which is said to be on the sale block. Monty denied speculation that BCE had made an offer to buy BC Telecom Inc., Canada's second-largest telephone company, saying he would be "more interested in partnering with BC Tel than buying them."

Ditto for Fonorola Inc. On Wednesday, that company's board of directors rejected an offer from Call-Net Enterprises Inc. to acquire all of the outstanding common and Class A non-voting shares for $60 a share.

Monty shrugged off the possibility of BCE making a bid, saying it "wouldn't make financial sense for an all-out purchase."

During the meeting, BCE chairperson Lytton (Red) Wilson told shareholders of the most widely held company in Canada that BCE had no plans to change its dividend policy even though the stock has been outperforming the Toronto Stock Exchange 300 index for the past two years.