They share one of the biggest rivalries in Canadian corporate history, but Bell Canada and Telus Corp. have agreed to build their next-generation wireless network together to save costs and get to market sooner.
The telecom giants consider wireless operations their engines of growth. But the units need heavy investment to keep pace with rapidly developing technology and intensifying competition.
Telus and BCE Inc.'s Bell will evenly split the approximately $1-billion cost of the joint network, said Wade Oosterman, president of Bell Mobility and chief brand officer for Bell Canada.
The current credit crisis has left many BCE investors doubting that the Ontario Teachers' Pension Plan and its partners will succeed in their $35-billion leveraged buyout of the company. The stock is selling at a 23-per-cent discount to the deal price of $42.75. But Mr. Oosterman said the wireless investment announced yesterday shows business can still be done in today's bleak economic conditions.
"Look at an organization like Bell. It has an outstanding asset base. It has lots of clients. It has good revenues and cash flows. Those underlying fundamentals allow us to make this investment," he said in an interview. "It speaks to the confidence we, and presumably Telus, have in this environment that we are in."
Neither company would discuss how it is financing the investment. But they said they have tapped Nokia Siemens Networks and Huawei Technologies Co. Ltd. to build the national network, which will include additional software, hardware and cell towers. The contract represents a huge win for China's Huawei, which is struggling to gain traction in North America, despite rapid success in Asia and Europe.
The build-out will extend Bell and Telus's existing 3G (third generation) wireless network to include the same technology standard employed by Rogers Wireless Communications Inc., the nation's largest cellphone company.
That standard, known as high-speed packet access (HSPA), as well as its precursor GSM, is the most common form used by carriers outside of North America. At the moment, Rogers enjoys a monopoly in Canada on both, which allows it to collect the lion's share of foreign roaming deals, as well as some of the most popular cellphones, such as Apple Inc.'s latest iPhone, which is designed exclusively for HSPA.
Once completed, Bell and Telus's new infrastructure will "emulate a single national network" but allow the companies to pursue their own business strategies, Darren Entwistle, president and chief executive officer of Telus, told analysts on a webcast. "This is a relationship that is going to stand us in good stead."
By working together, Bell and Telus expect to have the national network operating by early 2010. Several new wireless players are expected to have launched services by then, likely employing HSPA technology.
But the two telecom giants will be playing catch-up to Rogers, which has at least a two-year lead on them with HSPA and has used GSM technology since 2001.
The new network will also help the companies prepare for a fourth-generation upgrade (4G) in 2012, Bell and Telus executives said.
The partnership extends an agreement made by the companies in 2001. Under that deal, Bell got access to Telus's wireless network in Western Canada and Telus gained access to Bell's infrastructure in Ontario and Quebec.
BCE (BCE)
Close: $33, down $1
TELUS (T)
Close: $35, down $1.21
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