When friends do business with each other (gam)
Gordon Pitts
One was a rising star at Bell Canada, the other a brash young wireless entrepreneur.
They met in the mid-eighties, became friends, and did deals together. They owned country homes near each other on Lake Memphremagog in Quebec's Eastern Townships, on the favoured east shore where they could watch the sun setting over the water.
But when Jean Monty quit this week as BCE Inc.'s chief executive officer, it marked the sunset of his close, controversial relationship with telecommunications tycoon Charles Sirois.
It was Mr. Sirois who, in 2000, sold BCE the majority chunk of Teleglobe it didn't already own for $7.4-billion, and Teleglobe was Mr. Monty's downfall.
"It's the end of the road," said one senior Quebec corporate leader who knows both men. He added that the two men don't talk business any more.
The businessman said Mr. Monty, who had been one of Canada's most powerful managers, feels betrayed by Mr. Sirois, Teleglobe's chairman and CEO at the time.
The former BCE leader believes his old friend, who pocketed millions of BCE shares in the takeover, should have alerted him to the deep problems in the long-distance telecommunications carrier, the businessman said.
But the startling resignation of Mr. Monty, 54, has also raised questions about the 16-year partnership of these two men, and the influence Mr. Sirois, 47, may have wielded over his former business partner and friend.
"Sirois is a Rasputin-like figure in Monty's career," said one BCE adviser. "It's like he had a special hold over him. How else do you explain why he paid so much for Teleglobe?"
For others, the relationship is seen as business-as-usual in the cozy community of Quebec Inc., where richly priced assets are often traded among friends.
But these versions fail to account for the vision, drive and ego of Mr. Monty, who dreamed of leveraging his cash-cow telephone utility into a growth company, based on the power of the Internet. Teleglobe, with its long-haul carriage capacity, became part of that dream.
Mr. Monty no doubt saw the dynamic Mr. Sirois as not only a kindred spirit, but also a proxy risk-taker who could do the kind of daring deals that were closed off to the CEO of a widely held holding company, such as BCE.
Neither Mr. Monty nor Mr. Sirois were available to be interviewed.
As recently as a year ago, even as Teleglobe started to unravel, the relationship was still healthy, as Mr. Sirois acknowledged in an interview at the time. "Jean Monty is a very good friend, and we have been working together for many, many years."
Asked about his influence on Mr. Monty, Mr. Sirois, who speaks in enthusiastic staccato bursts, said, "I think Jean is a big boy and he can have his own ideas."
Still, Mr. Sirois presented a view of BCE's strategic predicament that echoed what Mr. Monty had described. BCE, he said, had to diversify and grow if it was to avoid absorption by a U.S. telecommunications player, because foreign ownership rules were expected to loosen in the next five years.
"BCE is in a very difficult position, they have no place to grow, okay? So Jean has a very distinct view. If he doesn't continue to grow, BCE will just disappear. If BCE is just Bell, it will be absorbed one way or another by a big American company."
Mr. Sirois said he had known his friend since 1986, when Mr. Monty, a balding finance specialist with an MBA from the University of Chicago, was responsible for BCE's new Bell Mobile cellphone business.
Mr. Sirois was born in Chicoutimi and did not learn to speak English until he was in his late 20s. He took his MBA at Laval University, and, armed with a strong finance training, went into business with his father Simon who owned a small paging outfit, among a bunch of other enterprises.
Mr. Sirois was the master of the deal, even then. Backed by the giant pension fund manager, Caisse de dépôt et placement du Québec, he kept adding small outfits as he built National Telesystem Ltd. into Canada's largest paging company -- by the time he was 32.
He then merged his company with BCE's wireless unit, which had come under Mr. Monty's purview. He was attracted by Mr. Monty's action orientation, unusual for a corporate middle manager. "I think Jean Monty's best quality is that he will not sit, he is action-driven. He would prefer to do a wrong action than no action at all."
Bell Canada became the 55-per-cent owner of the new Bell Mobile, as it was called, while Mr. Sirois held the rest, and served as chairman. He slipped into a role as BCE's in-house entrepreneur, and he did well when BCE took the mobile unit public in 1988. But by 1990, he was spending more time on his own business interests, which were increasingly focused on international wireless ventures.
Mr. Sirois became consumed with a dream of ubiquitous wireless communication that would change the way people lived. He would invest heavily in this dream, in Canada through Microcell Telecommunications Inc., operator of Fido -- a rival system to BCE's -- and in Europe, South America and Asia through Telesystem International Wireless Inc.
He also set his sights on Teleglobe, which was the monopoly carrier of Canada's overseas phone calls. Privatized in 1988, it ended up in the hands of Memotec Data, instead of what should have been its natural buyer, BCE.
In 1992, after a bitter proxy battle, Mr. Sirois swooped in to pick it up, with backing from cable baron Ted Rogers, the Caisse and, of course, BCE, which took a large minority stake.
Positioning the carrier for eventual deregulation, Mr. Sirois moved into foreign markets, selling services for its underseas cable and satellite network. But he also launched an expensive investment in a new global fibre-optics network -- the kind of capacity-adding move that would haunt telecom carriers such as Global Crossing and 360 Networks.
Mr. Sirois's vision looked fine, says consultant Iain Grant of Seaboard Research in Brockville, Ont., until "along came the fibre-optic salesman. Teleglobe got caught up in the same enthusiasm as the others."
In a 1997 interview with BusinessWeek, Mr. Monty, then CEO of Nortel Networks and described as Mr. Sirois's "closest friend," said that while the Teleglobe CEO couldn't battle the telecom giants head-on, "I [am] betting on him."
But Mr. Sirois stumbled in diversifying the revenue base. In 1998, he spent $4.3-billion for Excel Communications Inc., a Dallas-based retailer of telecommunications services, using a direct-marketing model that made it the Avon of its industry. The idea was to take the Excel model worldwide, but Excel never really fit in, hit technical snags and was undercut by rivals.
Despite these problems, Mr. Monty -- also a Teleglobe board member -- stepped up to buy the 77 per cent of Teleglobe BCE didn't own, and Mr. Sirois, Teleglobe's 8-per-cent owner, collected a bunch of BCE shares.
A year after the deal, Mr. Sirois was defending his purchase of Excel. "Sure we paid too much based on problems we had after that," he agreed, but the strategy was correct. "I still believe that it will work but it's a complex machine to make work."
Under BCE, much of the Excel purchase was written off and it was sold for $225-million (U.S.) earlier this year.
A year ago, Mr. Sirois was happy with where he was sitting. Most of his wireless holdings had taken some hard hits in the telecom meltdown, and his star had been badly tarnished.
His view is that a true entrepreneur rises above the occasional bumps. "You will start enterprises in good and bad days and you will identify opportunity in good and bad days," he said.
The betting is that Charles Sirois will be heard from again, but his old friend Jean Monty won't be coming along for the ride.
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