I imagine it is the general downturn in the market due to
1) Asia - Weak (new) PM of Japan; and
2) Low Canadian $ possibly prompting a rise in interest rate - Telephone Utilities are especially sensitive to interest rate hikes
Plus merger talk.......
3) The following from the Tuesday's Financial Post
Two big mergers could hurt Canadian telecoms companies
BY PHILIP DeMONT
Telecom Reporter The Financial Post
Canadian phone companies could be sideswiped by two major U.S. telecommunications mergers revealed on the weekend,
analysts say.
BC Tel and Qu‚bec-T‚l‚phone might find themselves with a new foreign parent if a merger between Bell Atlantic Corp. and
GTE Corp. goes through
And Bell Canada may wind up without an international phone partner if the proposed US$10-billion deal melding the overseas
arms of British Telecommunications PLC and AT&T Corp. is completed.
"This has to be a major blow to Bell," said William Catucci, president of AT&T Canada Long Distance Services Co., AT&T's
Canadian subsidiary. "I love it."
The AT&T -BT deal is designed to allow the two carriers to offer end-to-end communication services to the world's largest
multinational corporations for cross-border calling.
The proposed alliance also gets both companies out of two feeble international alliances.
AT&T has been a partner in the flagging World Partners global alliance, while BT has been a key player in the moribund
Concert partnership.
But the AT&T-BT joint venture could founder, as has almost every other alliance in the telecommunications sector, some
company watchers said.
"The alliance approach is a failed recipe," said Ford Cavallari, vice-president of Renaissance Worldwide Inc., a Boston-based
technology consultancy. "AT&T may have the might to take this failed recipe and turn it around. But I'm not very confident."
AT&T (T/NYSE) closed yesterday at US$60, up 1 1/816. BT was up 43 pence to 868p.
AT&T Canada, which has a large number of big corporate customers, could benefit because the alliance should enhance its
service portfolio.
"This is an opportunity to get stronger in the high end of the market," Catucci said.
Conversely, Bell has been a long-time Concert affiliate and now appears to lack an international linkage.
"Alliances like Global One and Concert never really worked," said Dvai Ghose, an analyst with HSBC Securities Inc. "But
BCE Inc., Bell's parent, could be a loser" in the deal.
Shares in BCE (BCE/TSE) finished at $61.35, down 70›.
Teleglobe Inc. also may face problems from the AT&T-BT agreement. That's because the Montreal-based carrier, which has
the third-largest international network in the world, is chasing the same corporate customers as AT&T-BT.
But investors would make a mistake to believe Bell and Teleglobe are without options, company watchers said.
"The AT&T-BT deal is a move to a data network based upon an Internet protocol," said Mary Ann Demonte-Whelan, an
analyst with Loewen Ondaatje-McCutcheon Ltd., a Toronto-based brokerage. "That's exactly Teleglobe's strength."
In the weekend's other major agreement, Bell Atlantic and GTE are in talks about a possible combination that could lead to the
creation of a US$50-billion local phone carrier with one-third of the U.S. market.
The two firms want to build a larger local carrier to battle SBC Communications Corp., which has proposed a US$66-billion
merger with Ameritech Corp., the large Midwestern U.S. based carrier.
"Bell Atlantic has to go wherever their customers want them to be," said Iain Grant, managing director of the Yankee Group in
Canada. GTE could offer Bell Atlantic better links into these regions, he said.
In Canada, GTE has an 86.39% voting interest in Anglo-Canadian Telephone Co., which controls 50.7% of BC Telecom Inc.
BC Telecom owns BC Tel and other communications assets in that province. Anglo-Canadian also controls
Qu‚bec-T‚l‚phone.
Ottawa allows GTE to control BC Telecom and Qu‚bec-Tel, even though that position would otherwise violate federal foreign
ownership rules, because the U.S. company has held its interest in the two carriers for decades.
Federal officials said they probably would approve a change in ownership for the two Canadian carriers.
Shares in Bell Atlantic (BEL/NYSE) closed yesterday at US$44 15/16, down 1/4, while GTE (GTE/NYSE) finished at
US$55 3/4, down US$2 3/16.
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