Teleglobe move to creditor protection unlikely to cause LD upheaval for ILECs

Teleglobe Inc.’s move to creditor protection should not have a major impact on the overseas LD service of Canadian ILECs. Most of them say they are in the process of making other arrangements or that they have little exposure. Within hours of the May 15 announcement by Teleglobe that it had received protection in Canada and was following similar paths in the United States and Britain, Bell Canada issued a news release to reassure its customers. "While Bell does not anticipate a decline in the level and quality of service provided by Teleglobe, as a precautionary measure, it is provisioning network backups through international carriers such as AT&T, Equant, Sprint and Telstra, among others, to support its overseas traffic," the company said. One of the country’s smaller ILECs is relying on a bigger company to ensure that its traffic continues unabated. It does not foresee any problems. "As SaskTel is aligned with Bell, we have been in communication with them to ensure that the necessary network provisioning backups are in place," corporate affairs director Michelle Englot writes in an email to Network Letter. "SaskTel is confident that, in conjunction with Bell, the determined network provisioning backups will be adequate." Manitoba Telecom Services Inc. is in a similar position. Bonnie Staples-Lyon, VP corporate communications, tells Network Letter the provincial ILEC will not take any action on its own, since it has its agreements in place with Bell Nexxia. Telus Corp. reports that it has limited contact with Teleglobe."The traffic Teleglobe carries for us is negligible," media relations manager Doug Strachan writes in an email to Network Letter. "Our data traffic travels over our own backbone, then on to Verizon, Genuity, WorldCom, etc. As far as voice, we pipe a miniscule amount through Teleglobe, so there is no real impact on us." He adds that a British network analysis firm, NetConfig.com, recently named Telus’ network the best-connected in Canada. The Teleglobe retreat from all but its core business is having a huge effect on the industry. It laid off 850 workers, about half of whom worked in the United States. The Canadian operations lost 127 employees, 102 of them in the Montreal office. The carrier will spend US$25 million in severance and outplacement services for the disgarded workers. The money will come out of the US$100 million BCE Inc. is providing in debtor-in-possession financing. BCE announced last month that it would not provide long-term support to its subsidiary (NL, May 7/02). Last winter Teleglobe announced that it was outsourcing various operations to Bell Canada and CGI (NL, March 25/02). That deal, which would have seen 600 Teleglobe workers moved to other companies, was cancelled following the creditor protection. The possibility exists, however, that some senior managers will find haven at BCE. While nothing has been officially announced, industry observers point to the usual operating procedure at the telecom conglomerate. Adding credence to this rumour is the fact that Teleglobe’s new COO, Serge Fortin, was president of Bell ActiMedia before joining Teleglobe two years ago (NL, May 23/00). Teleglobe is proceeding immediately with divestiture of its hosting business and parts of its data transmission operations, and it is scaling back other data services. Selling the streamlined Teleglobe could be difficult. Foreign ownership limits restrict the percentage investors from outside the country could hold in Teleglobe. While the federal government has spoken about liberalizing the rules, no plans to change the laws appear imminent. Even in the unlikely event that a bill was introduced soon, it could not pass through the Parliamentary process quickly enough to affect the Teleglobe situation.

Teleglobe move to creditor protection unlikely to cause LD upheaval for ILECs

News | May 21, 2002

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