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To: Softechie who wrote (1101)	4/17/2001 9:31:36 PM
From: Softechie	Read Replies (1) \| Respond to of 2155

Canada telco giants get second wind as minnows die By Ian Karleff TORONTO, April 17 (Reuters) - After only three years, Canada's upstart local phone operators are running out of cash and filing for bankruptcy, giving established ex-monopoly players the chance to win back the customers they were loath to lose when local phone services were deregulated. AXXENT , with 35,000 high-speed data, Internet and voice services business customers, warned on Tuesday its cash will only last until the end of May, at which point it will likely seek protection under creditor protection laws. The Toronto-based firm, created after regulators opened the local phone market to competition in early 1998, is only a short step away from the fate of bankruptcy protected C1 Communications, MaxLink Communications Inc. and Cannect Communications. "They're dropping like flies," said Mark Quigley, an analyst with telecom research firm Yankee Group in Canada. "But this is more a reflection of the economic climate than their underlying business plans." There are now about 30 competitive local exchange carriers, or CLECs, operating in Canada, all setting their sights on lucrative business customers. C1 filed for bankruptcy protection in early April, and has since been rescued through an acquisition by GT Group Telecom , itself an emerging telco that analysts see as one of a handful still on a strong financial footing. Quigley said telecom companies are finding it next to impossible to find funding to build ambitious new networks while even the strongest of bellwether firms, such as Cisco Systems and Nortel Networks, warn of a severe slowdown. Call-Net Enterprises , which operates under the Sprint banner in Canada, has been laboring under a mountain of debt and a dwindling customer base. Its shares traded at 50 Canadian cents on Tuesday, down from a March 1999 high of C$14.25. UBS Warburg analyst Stuart Isherwood said that, other than privately owned Norigen, for which no financial information is available, GT Group Telecom and AT&T Canada are the only emerging telcos likely to weather the current storm. Canadian alternative phone carriers are not alone. U.S. based WinStar Communications said on Tuesday it was considering filing for bankruptcy after defaulting on debt payments. International emerging telco XO Communications Inc has seen its stock price wither to $2.61, from a year high of $47, as investors fret about rising debt and rapid cash burn. WHY BUY - JUST WATCH THEM DIE Established phone carriers like TELUS Corp. and BCE Inc. , have watched many of their best business customers gravitate to the discount services offered by emerging telcos. But now the tide is turning. "A lot of these small CLEC's are losing funding and going belly-up, such as AXXENT...certainly this is one of the big positives for incumbent operators and therefore for BCE," added Isherwood. The elimination of some of the weaker local carriers will not only ease pricing pressure that has trimmed profit margins for the group, but it will also mean more market share for those who survive, said Isherwood. And there is little incentive for companies like Telus, with a recently stated goal of making acquisitions outside of western Canada, to bother acquiring the withering emerging telcos, when it can just wait for them to die a natural death. Telus has made bold strides into BCE's backyard over the past year with the purchase of cellular phone firm Clearnet Communications and two smaller purchases earlier this year. But analysts said emerging telco bankruptcies will benefit BCE more than Telus because it was BCE's customer base in Quebec and Ontario that the new entrants cherry picked the most. AXXENT said on Tuesday it had looked for buyers but none emerged. Isherwood said if AXXENT, which is valued at about C$20 million, couldn't find a buyer, it is unlikely other emerging telcos will make attractive acquisition targets. "It's hard to believe that other companies like GT Group Telecom will get bought with an enterprise value of C$2.5 billion," said Isherwood. GT's shares have fallen to a year low of C$6.75, down from C$28.85, giving it a market capitalization of about C$800 million with another C$700 million in debt. ($1 = $1.56 Canadian) REUTERS Rtr 18:38 04-17-01