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Danylo Hawaleshka June 3 2002
Tech Explorer

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Danylo Hawaleshka June 3 2002



BCE’s new CEO will need to shake things upjust like his mother


In her day, the late Laura Sabia was never shy about poking establishment noses. Tart and outspoken, the founding president of the National Action Committee on the Status of Women in 1972 was a champion upender of the status quo. Now her youngest child, Michael, has suddenly vaulted into the top job at BCE Inc., the bluest of the blue chips—it’s telephone giant Bell Canada’s parent after all—albeit in one of its periodic slides from glory. Thank goodness, shareholders may say, the apple doesn’t fall far from the tree.

When 48-year-old Michael Sabia takes the dais this week at BCE’s annual meeting, he will be wearing his darkest suit, speaking in his most careful tones and doing his best to keep his electric hair under control. Don’t be fooled; he is truly the iconoclast’s son. In two previous incarnations, Sabia took his lack of specific training, his distanced eye, and turned it into an asset. “If you want to know about water,” he once said, “don’t ask a fish.” Ask instead, the one getting thrown in the deep end.

His first dunking was the GST. Somebody had to think that sucker through and figure out how to implement a new federal consumption tax across an unwieldy and unwilling economy during the all-consuming ’80s. Might as well be the new kid in the Finance Department, you know, the one with the political science degree from Yale who had wanted to be an academic.

Then came a six-year stint as Paul Tellier’s sidekick at Canadian National Railway Co. Just a couple of old civil service buddies fixing up a clunker. Actually, two

pretty intense, ferociously driven ex-bureaucrats, who made a pig fly, as one business book had it: first by privatizing the former Crown corporation and then by turning it into one of the most efficient railways in North America. “This was a business miracle that business people were not able to produce,” observes Stanley Hartt, chairman of Salomon Smith Barney Canada Inc., a commercial banker, and a deputy minister of finance during the Brian Mulroney years. And in the course of producing it, Sabia became, in Hartt’s view, “the quintessential CFO,” a chief financial officer who was routinely sought after by other corporations for his strategic thinking. “And he doesn’t even have an accounting degree!” says Hartt. “He’s not trapped by thinking inside the box’ because he hasn’t been in any single place long enough to be in a box.”

But he is now. If not all that much is known about Michael Sabia—he’s turned aside all interviews at least until he has met with shareholders and has all his management ducks lined up—there is no shortage of speculation about what ails

giant BCE. Sabia has been at the telecom and communications conglomerate since October, 1999, coincidently just a few months after mentor Tellier joined the BCE board. Sabia started by running Bell Canada’s international arm, its investments in phone and Internet companies in Asia and Latin America. But he was quickly moved up the ladder. By July, 2000, he became executive vice-president of parent BCE, and in January was named its chief operating officer, the No. 2 (again) but clearly the heir apparent to the patrician Jean Monty. No one, however, thought the coronation would come as quickly as it did, at the end of April, when Monty unexpectedly lost a protracted batde with the BCE board, fell on his sword, and left it to Sabia to pick up the corporate pieces. Pretty big pieces at that.

Bell’s telephone operations were all doing well, aggressively grasping for market supremacy, in fact. But almost all its other big investments were coming apart at the seams. And BCE shares, the once-happy haven of widows and mutual funds, had lost about a third of their value. The biggest


headache was Teleglobe Inc., a state-of-theart subsidiary that was girdling the world with fibre optic cables in anticipation of an e-commerce data boom that never quite materialized. By walking away from Teleglobe in April, after what some estimate as a $ 15-billion investment, and pushing it into court-ordered bankruptcy protection, BCE has staunched its red ink. But it has also lost its own set of overseas conduits and, more importandy perhaps, the parent company’s withdrawal has really ticked off a long list of creditors. Which leads to headache No. 2.

At the end of June, a six-month window opens for SBC Communications Inc. of San Antonio, Tex., one of the more successful of the so-called Baby Bells in the U.S., to require BCE to buy back SBC’s 20 per cent stake in Bell Canada for fair market value plus a premium of 25 per cent. Or roughly $7.5 billion. Given SBC’s own ambitions—it has reportedly been sniffing around the fire sale possibilities of its former parent, AT&T, as well as Teleglobe— most analysts expect BCE to have to come up with the money somehow. Doing so might also bring it face to face with the underpinnings of the Monty-induced, Sabiabacked strategy, the so-called three Cs: content, connectivity and (e-)commerce. This was the notion that prompted BCE to go out and buy itself a television network, CTV, and a newspaper, the Globe and Mail, to pump through its new-found Internet and Teleglobe connections.

“This won’t be his first priority,” suggests Lawrence Surtees, senior telecom analyst with IDC Canada and a long-time Bell watcher. “But within six months to a year I can see Sabia dismembering his media properties. They make money. But for BCE that’s mosdy chump change. And if you want to be a real convergence carrier, you don’t want to be just locked in to your own guys, you want to be able to do deals with their competitors.”

The end of convergence? Much too soon to say. Sabias first moves have been very cautious, moving his own executives up into place but no radical house-cleaning. The look is much more one of BCE’s time-honoured corrections. For a bluechip operator, it has a history of buying the wrong assets at the wrong time. During the booming 1980s it saddled itself with real estate and energy appendages. Then, after selling Nortel Networks Corp., its

manufacturing arm, two years ago it went on its Internet and media buying spree. But in many respects, Surtees argues, Bell has been retrenching for much of the last decade, solidifying its hold on business and household telephone use in Central Canada, the Maritimes and parts of the West. “There has always been that question,” he says. “What does BCE want to be when it grows up?”

You might say the same for Michael Sabia. He’s probably taken his talented amateur act as far as he can go. He’s not the No. 2 any more, as he was at CN or even with the GST, where his immediate boss

was tough-talking David Dodge, now the governor of the Bank of Canada. Sabias now the one in charge, not the “shit disturber” he once called himself who can afford to challenge everything that’s on the table. By most accounts, an impressive, quippy, likeable guy—“as long as you have the smarts to stand up to him,” a former colleague says—even former opponents have nothing but praise. “He’s brilliant, bulldoggy but always courteous,” says exLiberal minister Doug Young, who was his party’s GST critic in opposition and then worked closely with Sabia and Tellier on the privatization of CN.

So far, Michael Sabia has slipped in under the radar. He’s not even listed in the Canadian Who’s Who. But his wife, Hilary Pearson, is and there is a story in that. They met at the U of T, in their very first year and married in 1983 when they were both civil servants. She is the granddaughter of a Liberal prime minister; he is the son of the feminist firebrand who ran for the Tories and routinely threatened Mike Pearson with all manner of political devastation. An establishment marriage? Their daughter’s name is Laura. HD