N.S. businessman continues to invest in his diverse holdings, GORDON PITTS writes
T hese are heady times for John Bragg, the Nova Scotia tycoon whose holdings span no-tech blueberry patches and high-tech telephone service over cable TV networks.
Mr. Bragg, 63, is about to take over a financially troubled processing plant and berry-growing lands in northern New Brunswick, cementing his status as North America's blueberry king.
Meanwhile, he's predicting that the pioneering local telephone service offered by his EastLink Cable Systems in Nova Scotia should start turning a profit in about 12 months.
"We're losing some money now, but it's not significant," says Mr. Bragg of his 3½-year-old telephone venture, the first in Canada provided by a cable TV operator.
The potential breakthrough comes after Mr. Bragg has invested $75-million to $100-million in the premise that EastLink can mount a viable telephone alternative to Atlantic telecommunications giant Aliant Inc. of Saint John, N.B.
The investment has established Mr. Bragg, a recent inductee into the Canadian Business Hall of Fame, as one of business's most extreme cases of split personality.
One moment, he's tending berry fields in Maine; the next, he's driving one of the most radical communications experiments around.
His business card lists Halifax-based EastLink and Oxford Frozen Foods, the 35-year-old blueberry operation he runs out of Oxford, N.S. (population 1,300). He devotes about equal time to each, and his children are also evenly split: Two work in cable and two in food processing.
Still, Mr. Bragg is clearly more comfortable talking about blueberries than fibre-optic networks, an area in which he relies heavily on his ground-level staff and their wisdom. "If they can explain it in layman's terms, I can understand it," he says.
By venturing into the telephone business, Mr. Bragg is actually doing what other cable TV players, such as Toronto's Ted Rogers, have been talking about for decades. A few U.S. cable systems offer local phone options but they usually cherry-pick big apartment buildings for customers. "We went down the street and into the homes," says Mr. Bragg, who has owned cable systems in Nova Scotia for three decades.
Outsiders estimate that about 30 per cent of EastLink's 240,000 cable subscribers in Nova Scotia and Prince Edward Island are taking the telephone option, often selecting the bundled package of full-tier cable TV, high speed Internet and local telephone for about $100 a month.
Mr. Bragg, whose businesses are private, doesn't argue with the 30-per-cent figure. In Truro, N.S., for example, the telephone service enjoys about 28 per cent penetration of EastLink cable subscribers.
EastLink has proved to be a significant thorn in the side of Aliant, majority owned by Montreal-based BCE Inc., although Mr. Bragg tries to play down the rivalry. "We might be a quarter of 1 per cent of [BCE's]business."
The common thread in Mr. Bragg's holdings, which include a small chain of building supply stores, is a philosophy borrowed from late Nova Scotia supermarket magnate Frank Sobey. Mr. Sobey used to say: "Always leave the back door open," which Mr. Bragg interprets as "don't bet the whole farm."
That hasn't stopped him from taking risks, such as the ground-breaking concept of building telephone switching capability into his cable network. But he sees this as a defensive strategy to counter what he saw as potential threats from other cable systems and bigger telecom companies.
"The customer is our base and we had to protect that. There was lots of talk about other people getting into the phone business, and we wanted to be the first," says Mr. Bragg, who now admits the competition didn't emerge as he once thought it would.
Mr. Bragg didn't do a big study on the potential market for EastLink's phone option. He just figured out how much he could afford to lose in launching the service, and came up with the figure $10-million.
He proceeded to hold his EastLink managers to that limit. At one point, after $7-million was spent, they came with a proposal to spend $5-million on new systems software.
"Haven't you ever heard of lead pencils and scribblers?" Mr. Bragg asked his people in response to their request. They then went back to the drawing board and designed their own software. Eventually, they established a business case for the telephone service and EastLink hasn't looked back.
The spending on telephone technology has been part of a series of big investments by EastLink, including the $220-million purchase of the Nova Scotia cable operations of Shaw Communications Inc. of Calgary in 1998.
Following a period of heavy capital investment -- about 50 per cent higher per subscriber than his bigger rivals, Mr. Bragg contends -- the cable company should start to generate free cash flow in the quarter ending Nov. 30, 2003.
Meanwhile, blueberry operations are quite profitable, based on annual revenue of $100-million to $200-million. He's been in that business since his late 20s, when he converted abandoned farms acquired by his lumberman father to berry-growing.
Today, he owns 14,000 acres for blueberry production, comprising 4,000 acres in Nova Scotia and 10,000 acres in Maine, which he bills as North America's largest fruit farm. When he acquires the operation in Tracadie, N.B., it will add another 4,000 acres.
Mr. Bragg, who employs 2,000 people in blueberries, has invested heavily in new plants, including a 0.8-km-long facility in Oxford. A recent expansion was back-stopped by a controversial $38-million loan from Nova Scotia, which critics say exposes Mr. Bragg's cozy relationship with provincial authorities.
That viewpoint clearly hits a nerve. He points out in different parts of Canada, there are different financial tools available to finance "things which lie outside the box." In rural Nova Scotia, the only option is usually the province.
He can get bankers to fund his cable TV operations, but those same institutions "don't have a big comfort level financing a manufacturing operation in rural Nova Scotia with a 15-year payback."
Mr. Bragg portrays himself as a champion of rural development in Atlantic Canada, in the face of a substantial retreat by Ottawa and the scorn of city dwellers. "We create jobs in a small community. I like to think we're admirable instead of being a sinner."