BCE, Telus join forces on satellite TV

BCE, Telus join forces on satellite TV

TORONTO — Canada’s two biggest phone companies are skirting their historic rivalry to team up on their second partnership within months, as they struggle to find ways to boost profits.

Both BCE Inc.’s [BCE-T] Bell Canada and Telus Corp. [T-T] face stagnant sales as the recession crimps spending in the growth areas of wireless, data and video services; as competition in mobile phone service grows; and as their traditional core land-line business shrinks.

Both are looking for smarter ways to operate. They unveiled an agreement yesterday that will see Telus sell Bell’s satellite TV service to customers in British Columbia and Alberta under the Telus brand, with the companies sharing the proceeds. Although Bell will continue selling the service under its own name in the region, the deal strengthens its national reach. The agreement also helps fill a gap in Telus’s product line while it builds out its own TV service over Internet lines, known as IPTV.

Both companies posted quarterly results Thursday, with Telus surprising the Street on news that its nascent IPTV service has drawn more than 100,000 users. That technology alone may not be enough to help Telus catch up to Shaw Communications Inc., its western rival. (Shaw has reported strong growth in TV subscribers, a rise in Internet and home phone users and is expected to enter the wireless phone market as early as next year.) Last October, Bell and Telus teamed up to overhaul their wireless networks and convert to a new global standard to better compete with Rogers Communications Inc. and several new mobile operators expected to launch service within the year. Bell said that network will be running early next year, before the Vancouver Olympics, of which Bell is a sponsor.

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•BCE buying rest of Virgin Mobile Canada •Telus cuts outlook •Look to sell spectrum to Rogers-Bell Bell also announced Thursday it is buying the half-interest in Virgin Mobile Canada it does not already own for $142-million, as it prepares for discount rivals. Bell will continue to pay Virgin Group in Britain licence fees for the brand – it targets the youth market.

Analysts estimate that Virgin customers comprise almost 10 per cent of Bell’s 6,527,000 wireless customers. Andrew Black, chief executive officer of four year-old Virgin Mobile Canada, said last month that it was on track to hit one million subscribers by next spring and two million within four years.

The acquisition could lead Bell to eventually kill its discount wireless brand, Solo, but it will maintain Solo for at least a few years, CEO George Cope told reporters after BCE’s annual shareholder meeting.

At the higher end of the wireless market, Bell, Telus and Rogers have all seen demand for smart phones swell. This week, Bell said it will be the first carrier outside the U.S. to carry Palm Inc.’s newest smart phone, the Palm Pre, though not until later this year.

Rogers already has exclusive rights to Apple Inc.’s iPhone in Canada and said Thursday it will bring the first mobile devices powered by Google Inc.’s new Android operating system to Canada in June.

Competition in wireless is mounting just as subscriber growth and profitability slow across the industry. Bell added 30,000 new wireless accounts in the quarter, about 14 per cent less than a year earlier, and saw average revenue per user (ARPU) slip to $51.52 in the quarter, 80 cents less than a year earlier. Telus added 48,000 net new wireless accounts, 48 per cent less growth than a year earlier, and ARPU slipped 6 per cent to $58.39.

Telus reduced its forecast for revenue and earnings in 2009. It said it shed 1,160 jobs in the first quarter, or 3 per cent of its work force, and that annual restructuring costs will be $125-million, up from $59-million in 2008.

Bell began its own extensive cost-cutting plan last summer when Mr. Cope took over. It has involved everything from eliminating consulting contracts and streamlining advertising to cancelling thousands of corporate credit cards. About 3,500 jobs were cut in 2008 and another 1,000 people are expected to leave this year under an already announced early retirement package. “If we hadn’t done that … we would have been challenged [today],” Mr. Cope said Thursday BCE Inc. (BCE)

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