The wireless arms of Bell Canada and Telus Corp. have struck a pact to piggyback on each other's networks in rural areas, slashing the time and cost of launching advanced nationwide digital services.
Bell Mobility is shelving its plans to extend its wireless network into rural areas in the West, with Telus Mobility deferring its expansion into rural Ontario and Quebec. Each company will save at least $500-million in capital expenditures over the 10-year life of the agreement.
And the deal will allow Telus Mobility and Bell Mobility to start selling digital service across most of Canada in January, at least two years earlier than if they had built their own networks.
Telus and Bell, whose digital networks each serve areas containing about 65 per cent of the country's population, will be able to sell to more than 90 per cent of Canadians once the pact is fully implemented.
"This truly takes Telus Mobility to a full national digital carrier," president George Cope said.
Pierre Blouin, president and chief executive officer of Bell Mobility, said he believes his firm will have the most extensive digital network in the country after the deal is completed, edging out that of Rogers Wireless Communications Inc. "It gives us instant access to non-urban areas in the West."
The two companies use the same underlying technology for their digital networks, making the piggyback arrangement technically feasible. But Bell Mobility said economic factors spurred the deal, including increasing pressure to limit capital spending in the telecom sector.
Analysts said the entente between Telus and Bell will make life more difficult for Toronto-based Rogers Wireless and Microcell Telecommunications Inc. of Montreal. "It makes them a more formidable threat," Lawrence Surtees, senior telecommunications analyst for IDC Canada, said.
Microcell spokeswoman Claire Fiset said the deal won't affect her company, which she says has been "successfully competing" with both firms since 1996. Rogers Wireless did not comment.
The Telus-Bell pact holds an additional twist for Rogers, whose analog network is used by Telus to serve customers in areas of Manitoba, Ontario and Quebec. The roaming agreement between Rogers and Telus will be largely irrelevant by January and completely redundant by the end of 2002, when Telus and Bell are scheduled to finish the conversion of their networks from analog to digital technology.
The new agreement, which replaces an existing roaming deal, lowers the fees that each company pays when one company's customer uses the other's network. With those lower fees, the partners said, it's now profitable to sign up customers in "rural" areas, which can actually include medium-sized cities such as Sudbury.
The network-sharing deal will also benefit Telus and Bell by allowing them to increase the utilization -- and profitability -- of their rural networks, which carry less traffic than those in urban areas.
Dvai Ghose, telecommunications analyst for CIBC World Markets Inc. in Toronto, said Telus is the biggest winner, since it needs to bolster its presence in central Canada more than Bell needs to increase its presence in the West. "All things being equal, this is better for Telus than for Bell."
Mr. Ghose said he believes that Microcell and Rogers, which also have a common standard for their wireless networks, may also strike a piggyback alliance.
Microcell's Ms. Fiset said such a deal is a technical possibility but "you have to be compatible in other ways."