Reuters
UPDATE - Bell Canada announces 3-year C$200 mln Nortel deal
Monday September 8, 1:55 pm ET
By Luke McCann
TORONTO, Sept 8 (Reuters) - Bell Canada said on Monday that it would buy C$200 million ($146 million) in Nortel Networks Corp. (Toronto:NT.TO - News; NYSE:NT - News) equipment over three years in a move to provide its customers with telephone and multimedia services over the Internet.
Bell Canada, the country's No.1 phone company and unit of BCE Inc. (Toronto:BCE.TO - News), said the deal to deliver Nortel's advanced Voice Over Internet Protocol (VoIP) and Multimedia services to its customers is part of a five-year network investment plan.
"Our customers are looking for this type of service set," Eugene Roman, group president of Bell Systems and Technology, said on a conference call.
"We're moving to a connectionless world where you'll be able to offer to your (corporate) customers the ability to do voice conferencing, video conferencing, exchange of materials online at the same time," Roman said
Bell said the product will be offered by mid-2004 and launched first in the western Canadian provinces of Alberta and British Columbia.
"I think this is an evolution, not a revolution," one analyst said when asked what the deal meant for Bell Canada.
"It's not something you're going to see have a dramatic impact on revenues or cash flows out of service providers in the next year. This is a long-term sustainable migration from circuit switch networks to data networks," he said.
"Service providers will do this. They will make this migration because they have to. It's inevitable, or others will do it for them if they don't," he added.
Nortel shares were up 27 cents to $4.38 in New York on Monday, and were up 41 Canadian cents to C$6.01 in Toronto. Shares in BCE were up 9 Canadian cents to C$30.47 in Toronto.
Internet phone calling, known as IP telephony, is the evolution of a concept that computer users first explored some five years ago to make cheaper phone calls over scratchy Web connections.
Companies such as Nortel and Cisco Systems Inc. (NasdaqNM:CSCO - News) promise that putting phone and computer connections on the same network can cut costs and give employees new options.
In January 2002, Bell began trials with Nortel VoIP gear for its Enterprise customers. Bell said 35 other vendors were competing for the deal.
Pat Chiefalo of Merrill Lynch said in a note on Monday that Nortel's VoIP activity has picked up, as recent wins were announced China Railcom, MCI (Other OTC:WCOEQ.PK - News), and Cox Communications (NYSE:COX - News).
"While VoIP remains a relatively small portion of Nortel's overall business, we believe this will be an important growth area for the company longer term," Chiefalo said.
Bell Canada's willingness to spend on infrastructure, coupled with some other announcements that have been going on the industry, is good for the telecom equipment sector in general, said Rohit Sethi of Debt Insight, an affiliate of brokerage Wall Street Access.
"Nortel is unique in the sense that it has a pretty well built out IP base platform," said Sethi.
"And this (deal) is obviously good for Nortel. As long as they can protect their home turf, that's a good sign...But on the flip side it's Bell Canada and you kind of expect them to go to Nortel," he added.
The agreement includes a joint research and development initiative. Bell and Nortel plan to create an Innovation Center in Ottawa focused on creating new services based on IP telephony and multimedia standards, which will open during Bell Canada's fourth quarter. |
