AT&T goes on the attack

A U.S. phone giant targets Canada

DAVID ESTOK April 15 1996

AT&T goes on the attack

A U.S. phone giant targets Canada

DAVID ESTOK April 15 1996

AT&T goes on the attack


A U.S. phone giant targets Canada

Modestly furnished in tones of grey and mauve, the suite of offices occupies the 17th floor of a nondescript tower several blocks from the heart of corporate Canada. Inside, Jim Meenan, a soft-spoken but direct Minnesotan, presides over a skeleton crew of five, including a receptionist and a public relations adviser. At first glance, AT&Ts Canadian headquarters in Toronto seem rather ordinary. But there is nothing low key about Meenan’s mission: unleashing a well-financed assault on the $20-billion domestic telephone and cable television industries. In the next few months, AT&T, the world’s most powerful telecommunications giant, plans to expand its Canadian workforce, form alliances with key domestic companies and move aggressively into a spectrum of Canadian markets, from local phone service to satellite broadcasting and Internet access. “No company or country has the resources of AT&T,” Meenan, president of the company’s Canadian division, says flatly. “We have the money and the brainpower.”

AT&T’s push into Canada is part of a global strategy to become a full-service provider of communications services “anytime and anywhere,” as Meenan, 52, puts it. And it comes at a time when the world’s major telecommunications companies are scurrying into each other’s arms and forming strategic alliances to offer a

seamless package of products in markets spanning the globe. For corporations and consumers, the result will be an explosion of choices—and possibly lower prices—for everything from cellular service to cable. “Everyone is jockeying for position, looking for partnerships and trying to find out how to be all things to all people,” says Ian Angus, a Torontobased telecommunications consultant. AT&T’s decision to plant its corporate flag in Canadian soil will hasten the restructuring of the telecommunications landscape, he adds, shaking up domestic players such as Bell Canada and Rogers Communications Inc.

The era of alliances has been spurred by developments in the United States, where deregulation is driving local and long-distance telephone companies, cable operators and broadcasters to battle one another in markets that previously were separate fiefdoms. Last week, in the first of what is likely to be a flurry of corporate marriages, SBC Communications Inc., a leading cellular supplier based in San Antonio, Tex., announced a $22.5-billion deal with Pacific Telesis Group of San Francisco. The fourth-largest merger in U.S. history, it creates a company with 25 million U.S. customers.

The same trend is exploding internationally as consumers and business customers demand better products and more integrated services at a lower price. In line with a European Union directive calling for deregulation by 1998, France last week announced plans to open the country’s $30-billion telecommunications market and end the monopoly of state-run France Telecom. Meanwhile, British Telecom PLC was in negotiations to take over rival Cable and Wireless PLC. That deal, valued at $50 billion, would cement BTs position as the dominant force in a global alliance known as Concert, which includes MCI Communications and BCE Inc. of Montreal, parent of Bell Canada and Northern Telecom. BTs rivals include AT&T—which commands 60 per cent of the U.S. long-distance market and, through AT&T WorldPartners, has allies in Europe and Asia—as well as a coalition of Deutsche Telekom, France Telecom and Sprint Corp., collectively known as Global One.

By going global, the telecommunications giants hope to tie up large multinational accounts. AT&T, for example, could offer conventional and wireless phone service, Internet access, cable and satellite services to U.S.-based companies operating in Canada and overseas—freezing out domestic suppliers that can only service one market. London-based consultant Adrian May says the increasing power of the global giants “will squeeze out many of the smaller national operations. We’re beginning to see these smaller operators respond by teaming up with the alliance companies.”

In Canada, the pressure is building not only on provincial phone companies, which currently enjoy a monopoly on local service, but


As deregulation sweeps through the telecommunications industry, key players are forming global partnerships. The three most powerful alliances:



>► AT&T Corp.

^ Singapore Telecom

)► Several smaller European and Asian telephone companies


)► British Telecom PLC

>► MCI


>• Bell Canada and other regional Canadian phone companies

>Cable and Wireless PLC (in merger talks with British Telecom; controls Eiong Kong Telecom)


Deutsche Telekom

>* France Telecom >■ Sprint Corp.

also on cable owners. The Canadian Radio-television and Telecommunications Commission is committed to allowing competition in both the cable and local phone markets, giving rise to a single national industry. Last week, the cable industry moved to create a united front with the launching of a national partnership that will spend $5 billion over the next five years to upgrade and standardize cable technology. The new consortium, called, includes all the major cable companies, including Rogers, which also owns Maclean’s. It is cable’s counterpart to Stentor—an alliance of the country’s 11 regional telephone companies, including Bell Canada, AGT, BC Tel and Maritime Tel and Tel. Stentor president Carol Stephenson responded to the announcement by calling on regulators to allow swift entry into the cable business by the phone companies.

For Bell, the country’s biggest phone company, the increased competition could have serious implications. Bell officials know that change is coming— but they say the rules need to be standardized so that existing players have a shot at winning in the marketplace. Evidently edgy about AT&T’s growing presence north of the border, Bell last week called on the CRTC to hold public hearings into AT&T’s recent financial bailout of Toronto-based Unitel Communications Co., the country’s leading alternative long-distance company. Bell and its Stentor partners want regulators to examine whether AT&T’s role in Unitel violates federal foreign ownership rules. “This is a wakeup call for Canada,” said Bernard Courtois, Bell’s vice-president of regulatory matters. Courtois added that the country risks losing control of its telecommunications market to foreigners. “Why would a country do that to itself?” he asks.

Jim Meenan offers a ready answer: “The reason is that consumers see the changes that are happening in the world. When customers demand choice,

regulators shouldn’t deny them that choice.” And Meenan is optimistic about the prospects for rapid deregulation. “I’m not happy yet—there’s more to do. But we see a CRTC and a government that welcome competition.” Meantime, the AT&T Canada president is also looking at providing local service in individual apartment buildings and office towers—something already permitted by Canadian law—as well as buying a stake in a wireless phone company and, most critically, establishing partnerships with one or more big Canadian companies, particularly in the cable field. “My problem has not been to find partners. My problem is in finding the right partner,” the 30-year AT&T veteran says.

One likely stablemate is Rogers Communications Inc., which is burdened with $4.3 billion in debt and would benefit from AT&T’s financial strength and technological expertise. In fact, Rogers officials have been meeting with Meenan to discuss a potential partnership. Asked about those discussions, Rogers vice-chairman Phil Lind said: “Everyone is talking to everyone. But AT&T is a fabulous company.” Added Lind: “You’ll see some significant alliances. You need alliances to survive.” Meenan already has a close relationship with senior Rogers executives, having served as a director of Unitel back when its two largest shareholders were CP and Rogers. In September, those two stakeholders pulled out of the ailing company and were replaced by AT&T and a consortium of three large banks. The new owners plan to relaunch the long distance company under the AT&T banner later this year.

By then, AT&T Canada’s offices should be bustling. The half-dozen people who were working there last week will soon increase to some 200. ‘We’re just gearing up,” says Meenan. ‘We expect to expand into a number of areas by the end of the year. It’s moving fast.” A bit too fast for some.