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AT&T Canada is stuck between a rock and a hard place. In 1999, with the creation of BT and AT&T’s now failed Concert venture, BT invested 50/50 with AT&T in Rogers Cantel, which brought the AT&T Wireless brand to Canada. BT also bought 10% of AT&T Canada from AT&T (US) to solidify the agreement.

Then BT went out and splurged on 3G licenses and all hell broke loose. BT began to hemorrhage money and began to throw everything overboard that looked like it was too heavy. Last year both AT&T and BT were convinced enough that Concert was a failure to announce the dissolution of that enterprise, which left BT in a quandary. It no longer had any strategic reason to own a Wireless Service Provider and a CLEC in Canada (as if it did in the first place…).

Problem is, to whom do they sell these interests? AT&T Canada is pressuring the CRTC to relax Canada’s foreign ownership rules to sweeten the deal for any south-of-the-border suitors (in this market, no one wants to buy only 10%). AT&T (US) has no money to buy out BT in any of the ownership stakes, and in fact is re-evaluating its own goals with AT&T Canada.

So there’s no more money in the well for AT&T Canada which must make it a scary place to work these days. Hot on the heels of the cash calls and rating downgrades against Group Telecom in Q1/02, AT&T follows suit — proving that in Canada, just like in the US, the ILECs own the market. Rogers Communications, the parent company that owns most of Rogers Cable, Rogers/Cantel, and AT&T Canada, is fighting its own battles and has no money to buy out its US and UK cousins, making the situation that much more dire.

There is an empty dance card for AT&T Canada in trying to sell themselves both because of Canadian foreign ownership rules and thanks to their failure to execute on even the most meager of business case objectives. Unlike their parents, they have no revenue basis upon which to rely, and of course since their parents are all struggling no tree from which to pluck more operating capital.

In short, these are nail-biting times for telecom in Canada. Partially to blame is the over-regulation of ownership by the CRTC — more significantly to blame is the lack of oversight by the CRTC into how the incumbent carriers deal with resellers like AT&T Canada. They have essentially defended their monopoly in the Canadian marketplace by simply dragging their feet, just as was attempted in the US. To a greater degree, however, the Canadian ILECs have had full support of the government in doing so.

-Ian.

—— Forwarded Message From: Shiuman Ho Date: Thu, 02 May 2002 13:02:09 -0700 To: marketing [at] navigata [dot] ca Subject: AT&T Canada cuts 1,000 jobs…

AT&T Canada lost $1.75 million a day (counting weekends) at the net income level during the first quarter. First GT, then AT&T. Who’s next? 🙁

— Shiuman Ho Director Product Marketing Navigata Communications http://www.navigata.ca T: 604-990-5939 F: 604-990-2096

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