$100 million per year savings from the CRTC regulations already changed. Looking good for 2002...
Call-Net seeks 'regulatory relief'
Telco says changes to network-sharing fee structures vital to its turnaround plans
Guy Dixon
04:18 GMT-04:00 Thursday, May 17, 2001
TORONTO -- Call-Net Enterprises Inc. said yesterday that changes in federal regulations are vital if the local and long
distance phone company is to continue its turnaround.
Principally, the mid-sized Toronto-based telecom, which owns Sprint Canada, is asking regulators to lower the fees it has
to pay other phone companies for the partial use of their networks and other charges.
"Regulatory reform is fundamental to our success," said Bill Linton, Call-Net's president and chief executive officer, who
took the job of turning around the company seven months ago.
Many company watchers have blamed falling long-distance rates and Call-Net's costly introduction of new phone services
for contributing to its woes. But Mr. Linton argued that "market conditions have not influenced our financial results in recent
years anywhere near as much as the regulatory environment in this country."
Further "fundamental regulatory change" is necessary, "or we and the other competitive telcos will continue to suffer," he
said at the company's annual general meeting yesterday. He stressed the need for competition within the industry.
The company is particularly looking ahead to hearings by the Canadian Radio-television and Telecommunications
Commission in October on price caps to argue its case.
"We intend to take a very aggressive approach at these hearings, arguing our point that regulation continues to negatively
impact competition in this industry," Mr. Linton said.
With the goal of reducing expenses enough to become cash-flow positive by the fourth quarter, Call-Net's push for
"regulatory relief" was listed first among its three-pronged strategy for the remainder of the year, along with improving profit
and reducing costs.
Call-Net added that it will look to expand its local services, including moving toward high-speed home connections, as well
as pay down its debt, if it meets its cash-flow goal.
However, industry watchers and even Call-Net itself noted that the company is already benefiting from easing regulations
and lower fees.
Certain rates that local phone companies such as Call-Net have to pay incumbent carriers for the use of their so-called
"unbundled" network loops were reduced by 30 per cent. "And we are expecting a further 10-per-cent reduction in the
third quarter this year," Mr. Linton said.
In addition, contribution taxes levied on all carriers to subsidize unprofitable regions of the country will be lowered from 4.5
per cent to 1.5 per cent next year. Also, service fees charged by incumbent phone companies will be reviewed by
regulators.
"The CRTC has addressed contribution [taxes], but there are many other regulated rates to be addressed, and the impact
of years of uneven regulation has left its toll on us and on others," Mr. Linton said.
Analysts understood this as an attempt by the company to partially shift the blame for its past troubles onto Ottawa.
Everyone knew the regulatory environment two years ago when Call-Net entered the local phone market, said Dvai
Ghose, an analyst at CIBC World Markets in Toronto. "So if you went in hoping the regulatory environment was going to
change, then you were playing a pretty high-risk game, weren't you?"
He also argued that the reduction in contribution fees is a dramatic benefit for Call-Net, already resulting in savings of more
than $100-million.
Speculation has also been rife that Call-Net's talk of its "great basket of assets," its calls for Canadian regulators to ease
foreign ownership restrictions and its program to improve its balance sheet could all be a move to gussy itself up for a
future sale.
The company would only say that it had previously considered the option of selling itself, but decided not to pursue it.
Copyright © 2001 The Globe and Mail |
