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Report On Business Magazine Who do you call to clean up a mess like BCE? A man called Cope

A giant of a student dominates the centre of the court, his hand momentarily cupped over the ball at his hip as he reads the blurred movements of other players.

Then George Cope makes his move: a sideways pass to his guard that promptly leads to another two points on the board for the Rebels.

In the stands at Port Perry High School, two dads, Lang Cope and David Simmonds, cheer their sons' combination, then turn back to small-business talk. Their firms are rooted in a middle-Ontario town of just 3,500 souls. Yet in less than two decades, two of Simmonds' little businesses in the area will turn into keystones of Canada's fast-changing phone business.

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And the man that will make it all happen is heading down the court again. Another friend on the squad, besides Gord Simmonds, is Wade Oosterman, a foot shorter and a year older than Cope. He has no idea of the journey Cope will take him on, through three companies and far over the millennial horizon: Cope, the star basketball centre, will apply the skills he learns from the two entrepreneurs in the bleachers and, working alongside Simmonds and Oosterman, score deals that earn him a reputation as Canada's wireless whiz kid, and one of the telecom industry's most astute leaders.

For the moment, however, the school's 1979 athlete of the year and student council president is still growing into his 6-foot-7-inch frame. He has already thought about starting his own business as soon as he's out of school, but he's also being scouted by several university basketball coaches.







Young Cope is a conscientious worker who drills on the court and wants to understand the strategy and tactics of the game. Unlike most kids, he wants the coach to teach him the whole court. Understanding all the positions gives his own role clarity.

"There are some students that stick in your mind 30 years on," says Paul Arculus, the boys' assistant coach and English teacher. "Cope's group was one of those waves. They were good kids, intellectually and emotionally strong, but not brilliant."

Arculus remembers Cope as an excellent player and natural leader: He raised money to buy a Universal Gym, was instrumental in having bleachers installed in the gym for basketball spectators, and rebranded the team (the Redmen became the Rebels). The young Cope never won an academic prize, it's true; he had "an average vocabulary, with the words he needed," Arculus says. But crucially, he knew how to share the spotlight with his teammates.

And to hear George Cope tell it, it was a key lesson. "My entire career," he says, "comes back to basketball." Throughout that journey, Cope has also applied an early lesson from his dad, who knew from running gas stations and rust-proofing shops that "the only cost in life is time."

That would explain the man's focus. In his first 20 months as CEO, Cope has got his arms around the beast that is BCE Inc., the classic land-line phone company threatened by new technology, the giant that was forever shooting itself in its foot, until a frustrated shareholder tried to take it private-and that effort turned into a BCE fiasco too. (BCE owns 15% of CTVGlobemedia, parent of The Globe and Mail.)

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Summoned to head the company by that frustrated shareholder-Ontario Teachers' Pension Plan-the 48-year-old Cope has breathed new vitality into Bell, bringing clarity and a razor-sharp business instinct that colleagues and competitors marvel at. He has eliminated 6,000 jobs, partnered with a chief rival repeatedly to save hundreds of millions of dollars, boosted BCE's stock dividend three times, and begun to deliver on a financial strategy. BCE's revenue edged up just 0.4% in 2009, but profit nearly doubled, and Cope's profit forecast for this year exceeded Bay Street's expectations.

The job is far from complete, he admits. "Nothing ever goes as fast as you want it to go," he says. "There is some momentum in the company, for sure. I think we've done more than the market necessarily knows yet."



In person, Cope is not intimidating. He slides down in his chair, hunches forward, almost humbled by his own size. When a call from his wife on his cellphone interrupts a meeting, he gets up to leave his own office, without even thinking to ask his guest to step outside.

Indeed, there was never any "over-aggressiveness" in him, says his old coach. He had good friends, he was "a happy lad," both mature and respectful.

In the 1970s and 80s, Port Perry was a bedroom community, home to workers from the nearby Pickering nuclear plant and the General Motors factory in Oshawa. Parents were closely involved with the high school. Flipping through yearbooks, Arculus can rhyme off the successful careers of many former students. Tye Burt, a few years ahead of Cope, became CEO of Kinross Gold. Cope's teammate George Burnett became head coach of the Edmonton Oilers. Then, of course, there was Cope's telecom crew.

Cope's father, Lang, had a short stint in the CFL with the Toronto Argonauts. But there wasn't much money in it in 1951, even if you could punt 70 yards, so he went into business. Cope's mother, Daisy, ran her own fabric store in Port Perry. Their son followed suit: With his high-school buddy and teammate Oosterman, he began making money in the summer painting houses and digging basements.

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The two young men had made a pact to start a full-time business after high school. But instead they headed off to the University of Western Ontario. Oosterman studied economics and later did an MBA. Cope took his business training more quickly, opting for the undergraduate business degree. Initially lacking the marks necessary to get into the business school, he quit the varsity basketball team, even though the coach warned him he would never get back on. Cope landed a spot at the business school and, in his third year, a position on the team.

By the time he graduated, weak joints had sidelined Cope as a serious basketball player. It was straight on to business: a job in commercial lending at a suburban Toronto branch of Continental Bank. In the occasional lectures he gives to business students today, Cope likes to say that he took the job because he wanted to learn how an entrepreneur could get money from a bank. "The lesson," he says, "is you don't."

Even though he was in Toronto, Cope came back into the Simmonds' circle via a men's basketball league. His teammate Gord Simmonds and his older brother Bob were working at their father's firm, Lenbrook, an electronics distributor. Cope was quickly recruited into the family business. At the time, Lenbrook ran two communications companies that, 25 tumultuous years later, seem almost as far in the rear-view mirror as Alexander Graham Bell's call to Mr. Watson. Brooktel Communications Inc. sold first-generation cellphones for Bell and loaded them onto the carrier's nascent wireless network. Clearnet Communications sold two-way radio technology.

At 24, Cope was ready to take on the world. But he knew enough to look around and learn. In David Simmonds, in his mid-50s at the time, he saw a man bred for small business, someone who fostered good relations with everyone in his sphere, from suppliers to competitors. "David had an incredible understanding of how you pulled the different levers of marketing, be it the distribution side, the price side or the product side," Cope recalls. "It was a great education for a young guy on how you could, with a very clear strategy, differentiate in the marketplace by focusing on your distribution and product."

When Cope joined Brooktel, resources were tight. The company required a lot of cash as it added cellphones to Bell's network. The young executives worked out of a trailer in Pickering, wrapped in parkas through the winter. The Spartan conditions forced everyone to focus, recalls Oosterman, who followed his friend to Brooktel. Cope honed his talent for setting goals, making sure his team understood its role and stayed focused on execution. "We were young, in a very young industry," Oosterman says. "You had an opportunity to grow, and the industry didn't get ahead of George."

Indeed, Cope and Bob Simmonds were plotting to get ahead of the cell industry, comprised at the time of just Bell and Cantel (a young company that became the foundation of Rogers Communications' wireless operations). Brooktel developed to the point where it was loading so much of Bell's nascent wireless business onto the network that the telecom company decided to buy its supplier. The Brooktel partners put the proceeds into Clearnet, where, by 1987, Cope was serving as president. The plan: get into the burgeoning cellphone game themselves. "I think we knew, Bob Simmonds and I, that there would be more than two wireless competitors," Cope says. "We had the benefit of seeing how big this thing could really be. After a couple of years you got a sense, seeing what the manufacturers were doing, that this thing was going to be huge."

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Recognizing the opportunity to become the third national player was just the first step. The two men also saw the value of investing in the industry's real estate: wireless spectrum. Clearnet owned spectrum for two-way radio communication, used chiefly by taxi and bus companies. The pair figured out what few others realized: The radio spectrum was the same one used by cellular phones. Over the next few years, Clearnet quietly acquired about 20 other operations with radio spectrum.

That turned out to be the easy part. For Clearnet to challenge Bell and Rogers with a cross-country network of its own would require a lot of cash. Clearnet had some resources from the Brooktel sale and some financial assistance from two U.S. partners, Motorola Inc. and Nextel Communications Inc., which owned 10% and 15% slices of the firm, respectively. But it wasn't enough, so in 1994 Clearnet decided to go for an IPO.

The day Clearnet printed its prospectus, Nextel shares began to sink because U.S. telecom giant MCI had chosen that moment to decide it wasn't going to take a major stake in Nextel after all. That suggested an unfavourable parallel to investors: If a stateside independent wireless company trying to challenge the incumbents was damaged goods, then so was the Canadian equivalent.

Road shows that parade a planned IPO around to the investment community normally involve 30 to 40 meetings. But Clearnet, in a corner, lined up 160 meetings, starting in Japan. "We ran out of money on the road show. It went from investment bankers putting us on planes to putting us on trains, and then they just wanted us to give up," Cope says, shaking his head at the memory.

Over a weekend, he worked the phones and convinced Clearnet's original investors to put up more cash. Of the 15 million shares to be sold publicly, Motorola, Nextel, the Simmonds family and, ironically, Bell Mobility purchased 7 million.

After one more obstacle-the investment banks briefly balked-the $112-million deal was done. "Business-wise, the hardest thing I ever did was get that company public," Cope says. That hurdle cleared, he struggled to keep investors on side. The stock debuted at $15 and rapidly descended to $6.

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Still, the young crew at Clearnet now had the resources they needed. The market was ripe: Only 10% of the population had cellphones. "I knew for sure that there was room for more than two companies," Cope says. "It had to get done. There was no alternative."

Six years later, flush with 731,140 wireless customers, Clearnet sold out to Telus for $6.6 billion, or $70 a share. Many observers questioned the deal, but few would do so today: The purchase turned Telus, then a Western landline company, into a national player. It also put the stamp of new CEO Darren Entwistle on the company. Entwistle decided to let Clearnet forge on as a stand-alone unit inside Telus and he appointed Cope to lead it.

It's unusual for entrepreneurs to stay with their baby once it's been integrated into a major corporation. But most of Cope's team moved to Telus, intoxicated by the wireless revolution. "It touches virtually every aspect of business and society in this country," says Oosterman, who moved with Cope and became head of wireless marketing at Telus, and later followed him to Bell, where he runs Bell Mobility and branding. "We're in the business space, we're in the consumer space. We do packaged goods, we do enormously sophisticated financing. Engineering and IT are at world-class levels. It is an all-encompassing, very broad canvas."

For the next five years, Cope did what he knew best: He ran wireless. But Telus's youthful leadership meant there was no place for Cope to go internally. He left in 2005 with a one-year non-compete agreement and his rapport with Entwistle intact. "Darren and I are the same age, so there was a connection there-both young, aggressive guys," Cope says. "He was always very sincere about wanting me to run wireless. He lived up to the partnership, the expectations. It was a good journey. Everybody did well."

Cope might believe that he and his team, many of whom moved with him to Bell, laid a lot of the groundwork for Telus's success today. If so, he's not saying. He gives marks to Entwistle for adopting Clearnet's branding and fusing the cultures of the two companies. Entwistle declined to discuss Cope for this article. But the two men do call each other up when they see a mutual opportunity. Last year, they signed a distribution deal that allows Telus to sell Bell's satellite TV service in western Canada under its own name. For Telus, the deal supplements its phone-line IPTV service, allowing it to sell more TV-Internet-wireless bundles. Bell gets to maximize its satellite investments by adding more traffic.

An even larger deal between Bell and Telus is the high-speed national wireless network they completed last November at a cost of $1.3 billion. By agreeing to share construction, they were able to split costs and get to market significantly faster. Even though BCE is twice the size of Telus in revenue and market valuation, Cope said he never considered demanding a bigger ownership stake in the network. "If you have a partnership with somebody who you are going to compete with so aggressively, it's better to have the partnership balanced so no one thinks the other has an advantage. Otherwise, the long-term nature of that partnership can be challenged. We want this to last for years and years." Sportsmanlike.

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At the behest of BCE CEO Michael Sabia, Cope joined the com­pany's Bell Canada subsidiary as chief operating officer and president in 2006. The move into the leadership ranks was a little less smooth than it had been at Telus. This time, former colleagues were turned into fierce rivals. "To compete with people you have worked with is not always the first thing you would prefer to do, but Canada is a small country and everybody recognizes that," Cope says. Taking his career stateside would have been too disruptive to his young family. Besides, the Bell fix looked like a tasty challenge. The problem, however, was that for the first two years Cope, renowned for rolling up his sleeves, didn't have the authority to implement his solution.

Every year, hundreds of thousands of Bell Canada customers drop the company's core product, costing it more revenue than most other Canadian businesses make in a year. Put another way: Bell is short $200 million in sales the first day of the year, every year.

That fact alone should be enough to keep executives awake at night. But Cope found there was little urgency in the ranks. Bell was squandering between $200 million and $300 million of free cash flow a year by not getting around to collecting its bills from its largest clients: banks, insurance firms, mining companies and oil giants that wouldn't pay for 60 days or more, simply because they knew Bell didn't care.

Other problems plagued the carrier even as some 400,000 land-line accounts slipped away annually, lost to rival cable companies or wireless substitution. More than 20% of new Internet customers were bailing on the service in the first month. During the biggest burst of cellphone buying the country has seen, Bell hardly opened a single new wireless store in five years. And the company's field technicians, driving around daily to frustrated residential customers, lacked both cellphones and GPS systems. Shareholders, meanwhile, went 10 years without seeing a dividend increase, then watched with disbelief as the company cancelled two consecutive quarterly payouts in 2008.

One of the first things Cope did as Bell COO was set a goal of meeting with the vice-presidents-all 150 of them. By the time he'd talked to the first 30 or 40, a pattern had appeared. Many veeps said they wanted a different portfolio even though they hadn't been in their posts for long-sometimes less than a year. "Part of our issue culturally was that there was a constant turnover at the senior levels of Bell," Cope says. "When you lose institutional memory, you make the same mistakes twice." Cope instituted a guideline for his vice-presidents that was characteristically formulaic and clear: "The first year you lose money, the second we break even, the third we make money, the fourth-come and talk to me."

As things turned out, that formula would not apply to the president himself. After Cope was a little more than a year into the COO job, Sabia announced he would leave BCE as part of the $35-billion leveraged buyout deal that had been signed with a group of private investors in June, 2007. The move suddenly opened the door of the corner office. Some in the private equity group had advocated for Cope to replace Sabia, including Jim Leech, head of the Ontario Teachers' Pension Plan, and James Perry, a managing partner at Madison Dearborn Partners LLC, an investing firm in Chicago that had made a lot of money betting on the Cope team at Clearnet.

When it became clear to everyone that he was the buyers' man, Cope approached Sabia. "This is going to be a little complicated," he told the lame-duck CEO, and said he needed to set up in a separate location to build his 100-day transition plan. "You're absolutely right. We'll run the current business and you take care of what's going to happen going forward," is how Cope remembers Sabia's response.

But circumstances grew more difficult as efforts to close the deal dragged on for more than a year. "You just don't want to run a company where you're in limbo, and once I was going to be the leader and he was not going to be the leader, he and I had to work through it," Cope says. He adds that he has maintained good relations with the man he usurped. He says Sabia, now CEO of Quebec's Caisse de dépôt et placement, wants Bell to succeed and will occasionally text him a congratulatory note after a quarterly financial report.

"BCE is no longer a holding company. It's an operating company," says Sabia. "And George is the best operating telecom executive in the country. He understands execution-the importance of putting the puck in the net. He's always looking for the chinks in the armour of his competitors. And when he finds them, he knows how to exploit them."

Cope knows he needs his famous focus. He frames the challenge of leading BCE and Bell Canada this way: "Is it possible to get enough growth in your growth segments, and reduce costs while maintaining service? That's the high-wire act of Bell. You're trying to pull those three things together," he says.

But he is not just walking a tight rope. Cope is also juggling with both hands. On one side, his market is growing more competitive. Globalive Communications Corp.'s Wind Mobile, a well-funded new wireless firm, is rolling out service across Canada. Other players are poised to launch soon, despite efforts in the regulatory arena by Bell, Telus and Rogers to prevent them. The new entrants threaten to offer a combination of cheaper pricing and simpler service. On his other side, BCE shareholders are demanding better performance, after years of minimal returns.

With wireless, Cope has set a goal of winning one-third of the market's new customers. It's not an ambitious number for the largest phone company in the country. But he takes a practical view toward Bell Mobility, the industry laggard. "When you're third, it's like anything else. Let's get ourselves where we have the right to claim we are on par [with Rogers and Telus] and then we can talk about the next steps," he says. "The rest will take care of itself, because of our brand name."

For shareholders, Cope has sharpened the profile of BCE as a dividend-growth stock. With its combination of growing, declining and maturing business lines, not to mention perhaps the most dramatic dependency on domestic revenue of any major Canadian company, he thinks the best BCE can hope for is to keep up with GDP.

By his own admission, Cope is a numbers guy. He likes "measurables." "One thing I love about business is you can keep score," he says. "You can actually track performance, as you do in sports-who's first, who's second, who's third. There's no hiding." In his first days running Bell, he went looking behind the curtains-and remains incredulous today how some department heads didn't have a handle on their own costs.

Things are different now. Reaching into his desk, Cope produces the latest month's line-by-line expense report for the entire company, with comparables, for which every unit chief must now answer. "I go through all 121 pages myself. And they know I do," he says. "It sounds straightforward. But at a company as big as ours, things kept getting rolled up into big numbers. So I wanted to roll it down into small numbers. Because it's too easy to say to someone, 'Take $380 million of expenses out,' unless you can actually say, 'I see $12 million there, I see $6 million there, five there. Let's go through it.' "

In his first weeks as CEO, Cope established some of his own numbers: He eliminated 15% of management, acquired 750 new storefronts through the purchase of The Source electronics chain, committed to a capital expenditure rate of between 15% and 16% of operating revenue and a dividend payout rate of between 65% and 75% of adjusted share profit.

With one complete year of financials reported under his management, Cope says the balancing act is going well. "It's a tricky thing to try to figure out and make work. But our results are showing us that we are doing it. I can see it in the numbers."



Perhaps Cope is seeing the game plan take shape faster than the spectators around him. Smart people on Bay Street are quick with accolades about his talents and track record, but they remain uncertain about the outcome for BCE. "There are certain areas where he has really exceeded and certain areas he hasn't exceeded expectations," says Dvai Ghose, telecom analyst with Genuity Capital Markets and historically a big Cope fan.

"Where he has succeeded is he's taken a 130-year-old company and fundamentally altered its cost structure and culture," Ghose elaborates. But significant issues remain even after cost-cutting. Ghose suspects Cope may have misread Bell's wireless problems. He bought The Source at a discount price to match his rivals on distribution. But then he increased the system access fee by more than 25% to try to catch up on average revenue per user, expecting Telus and Rogers to follow suit. In fact, they removed the fees on new accounts, responding to a market that had suddenly become much more sensitive to pricing.

"I think he underestimated the public's discontent with the incumbent wireless operators," Ghose says. "He misread the political climate, and that move didn't create, but helped exacerbate, some of the regulatory and political pressures that all wireless incumbents were facing." Those pressures include Industry Canada's decision to set aside new wireless spectrum for new entrants to bid on, an outcry from Ottawa on the industry's pricing for text messages, and a recent decision by the government overturning a Canadian Radio-television and Telecommunications Commission ruling that new wireless entrant Globalive did not meet foreign ownership and control rules. "I'm not saying that it's his fault," Ghose says. "But given that his reputation, background and achievements have largely been on the wireless side historically, I assume that has to be an area of disappointment."

But when you look at Cope's face, you don't see disappointment. He still exudes an entrepreneur's optimism and loves being centre court in the rapidly moving telecom game. There is one call, however, that he is having trouble letting go of: the CRTC's decision to run the BCE privatization deal through a nine-month gauntlet. Without the delay, the Ontario Teachers' Pension Plan and its U.S. partners would have completed the transaction before the economic crisis unravelled the deal, he says. "I absolutely believe that if that process had happened within 90 days, the deal would have closed."

His frustration boiled over late last year, when Ottawa overturned the CRTC ruling on Globalive. "It took us nine months to prove that Ontario Teachers' was Canadian, and our new entrant was able to get a rule overturned in a week."

Like other telecom executives, Cope argues that the industry is moving too quickly for regulators to keep pace with. The CRTC, for example, has spent years studying broadband initiatives to bridge the "digital divide" between urban and rural Canada. But now Bell and Telus have made broadband internet available to 93% of the country over their new high-speed wireless network. "I haven't heard anyone in Ottawa talk about it yet," he says dryly.



If the brainiacs of Bay Street have it right, Cope is heading to a spectacular matchup against two of the biggest forces in telecom: the regulators that stymied his privatization drive and the man who out-muscled him at Telus, Darren Entwistle. Some analysts calculate that within a few years, economics will demand that Bell and Telus move beyond partnerships into a full-fledged marriage. Regulators wouldn't approve a merger of the two companies today, since they control more than half of the wireless market. But a deal could be possible in a few years if Bell and Telus have lost significant market share to the new wireless entrants, including Globalive, Vidéotron Ltée. and Shaw Communications Inc.

Cope won't weigh in on the speculation about "Belus," other than to say it's almost impossible to make long-term plans in an industry that moves so quickly. For now at least, the relationship between himself and Entwistle is straightforward. "We've done a lot of smart things for our shareholders in the last couple of years to try to eliminate duplication of capital, so that Canadians benefit from services faster. And yet we compete on the street at every level."

For the Cope entourage, whose members were smart enough to take a flyer on the man and stay the course in tough times, the speed with which events have moved over the last two decades is astonishing. David Wells, Cope's closest business confidante, fondly remembers the days when his friend booted around in a white Pontiac Grand Am that could barely contain his frame. "That he went from running a company that was installing car phones to become the head of BCE still blows me away," he says. "Would he ever in his wildest dreams think he'd be running BCE? I don't think so."

What is widely accepted is that Cope has unique experience in wireless and an exceptional range of talents for leading teams and running big business. When he joined the board of Bank of Montreal in 2006, the bank bypassed its careful selection process. "Every once in a while, an outstanding individual comes along and you jump at it," explains David Galloway, the bank's chairman and a one-time member of the Clearnet board. Cope understands companies from all sides, having built his own and learned the workings of every department from systems to accounting. Now he runs an operation of some 50,000 people. "He manages one of the largest companies in Canada. To have someone who has been there, who knows how to motivate thousands, initiate change and turn the tanker, is invaluable," Galloway says.

Wells, 62, is executive vice-president corporate services at BCE and occupies the office next to Cope's. He is one of several people the young Cope brazenly recruited from senior roles at much bigger companies. "People want to work for him," says Wells, who left the senior ranks of Bell to help Cope run Clearnet. "Luck spins off George Cope."

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