Telecom Update (Canada) #480, May 6, 2005

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published weekly by Angus TeleManagement Group

480: May 6, 2005

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IN THIS ISSUE:

** Nortel Sales Down From Last Year ** CRTC VoIP Decision Due Next Week ** CallNet to Acquire GT Assets in NB, NS ** Rogers Leads in New Wireless Sales ** Labor War Heats Up at Telus ** Telus Announces 3G Wireless Plans ** Bell Meets First SuperNet Target ** Qwest Abandons Attempt to Buy MCI ** Primus Canada Up to 40,000 Local Lines ** SaskTel Chooses Alcatel for Converged IP ** FCC Chair Wants 911 on Internet Phones in Four Months ** Aliant: Revise Our Quality Reports, Too! ** ITU Plans European Show ** First Quarter Financial Reports

BCE Profits Steady Telus Profits Double MTS Net Income Rises Call-Net Makes Gains

NORTEL SALES DOWN FROM LAST YEAR: Nortel Networks reports fourth quarter revenues of US$2.62 billion, up 20% from the preceding quarter but down 20% from the same period a year ago. Net income of $133 million was down 75% from a year ago. Enterprise sales in 2004 were

9% less than the previous year, and made up about a quarter of total revenues.

CRTC VoIP DECISION DUE NEXT WEEK: The CRTC's long-awaited decision on the regulatory framework for Voice over IP services in Canada is scheduled for release next Thursday, May 12. Next week's Telecom Update will provide a summary.

CALLNET TO ACQUIRE GT ASSETS IN NB, NS: Call-Net has agreed to acquire virtually all of the former Group Telecom's intercity and local networks in New Brunswick and Nova Scotia, along with certain switching and network equipment, from Bell Canada for $12.6 million. (see Telecom Update #435)

** Call-Net has also paid Bell $1.7 million toward an option to purchase over 90% of the remaining GT network in Ontario, Quebec, and Newfoundland and Labrador by the end of 2006, for a maximum price of $22.4 million.

ROGERS LEADS IN NEW WIRELESS SALES: Cellco results for the first quarter show Rogers with a net gain of 89,200 new wireless subscribers. Telus Mobility grew by 80,200, Bell Mobility by

37,000. Bell says its results reflect the cancellation of 45,000 non-paying accounts.

** Subscriber totals as of March 31: Rogers 5.58 million; Bell 4.96 million; Telus 4.02 million.

LABOR WAR HEATS UP AT TELUS: The battle between Telus and its employees organized in the Telecommunications Workers Union escalated again this week. Recent developments:

** Telus announced that it will stop deducting union dues from employees' wages and cease remitting the dues to the TWU.

** The TWU launched a Web-based campaign against Telus, and is urging the federal Minister of Labor to press Telus to settle. See

** The TWU is questioning the legality of the election of directors held at this week's Telus AGM. A TWU member ran for the board, but the chair disallowed proxy votes for him.

TELUS ANNOUNCES 3G WIRELESS PLANS: Telus Mobility says it plans to launch EVDO service, which transports data at "Third Generation" rates of up to 2 Mbps, in selected markets across Canada in the first quarter of 2006. (See Telecom Update #462)

BELL MEETS FIRST SUPERNET TARGET: By April 30, Bell Canada had connected 421 of 429 communities to Alberta SuperNet, meeting the target set by the Alberta Government. The eight remaining will be connected when weather permits. (See Telecom Update #470)

** Bell and its partner, Axia NetMedia, aim to have the majority of government facilities connected to the network by June 30 and to complete construction by September 30.

QWEST ABANDONS ATTEMPT TO BUY MCI: This week, MCI accepted Verizon's US$26 per share acquisition offer, although it was $4 less than Qwest's. Qwest has pulled out of the bidding, saying it is "no longer in the best interests of shareowners, customers, and employees to continue in a process that seems to be permanently skewed against Qwest."

PRIMUS CANADA UP TO 40,000 LOCAL LINES: Virginia-based Primus Telecommunications Group says its Canadian subsidiary had 40,000 residential lines in service by March 31. About 90% of the new local customers take a Primus LD plan as well.

SASKTEL CHOOSES ALCATEL FOR CONVERGED IP: SaskTel has chosen Alcatel, one of its long-standing data network suppliers, to equip the telco's IP network with the Alcatel 7450 Ethernet switch and 5620 Service Aware Manager.

FCC CHAIR WANTS 911 ON INTERNET PHONES IN FOUR MONTHS:

Published reports say the U.S. Federal Communications Commission will vote May 19 on a proposal to require providers of Internet telephone services to route 911 calls directly to the appropriate emergency lines by the end of September. The proposal is said to be supported by the new FCC Chair, Kevin Martin.

ALIANT: REVISE OUR QUALITY REPORTS, TOO! Aliant has asked the CRTC to exclude some of its Quality of Service results from the calculations that require it to pay refunds to customers for poor service. Aliant wants to exclude results for 4Q 2004 and 1Q 2005 that it says were affected by last year's strike, which lasted from April 23 to September 20.

** Telus made a similar request last week. (See Telecom Update #479) ITU PLANS EUROPEAN SHOW: Two years ago, the International Telecommunications Union decided to move its flagship Telecom World trade show and conference from Switzerland to Hong Kong in 2006. The ITU now says it will add a new event, Telecom Europe, to its schedule for 2007-2008. The date and location remain to be determined.

** May 17 is World Telecommunications Day, marking 140 years since the formation of the ITU.

FIRST QUARTER FINANCIAL REPORTS:

** BCE Profits Steady: BCE's revenues of $4.86 billion were 4.8% higher than a year ago; profits were $474 million, compared with $470 million in 1Q04. Bell Globemedia's sales rose 4.1%; Bell Canada's, 2.5%. Wireless revenues rose 9.5%, and data revenues rose 6.6%.

** Telus Profits Double: Telus net income of $242 million was 139% higher than during the same quarter last year; net income rose 9.5% to $1.97 billion. Data sales rose 11%. Wireless revenue rose 19% and now makes up 38% of Telus's overall sales.

** MTS Net Income Rises: Manitoba Telecom's profits of $42.5 million were 34.1% higher than a year ago, excluding one- time events. Revenues of $495.1 million were up 135% from a year ago, which did not include Allstream. Sales of the Manitoba division rose 5.3%; those of the national division were similar to the previous two quarters.

** Call-Net Makes Gains: In Q1 2005, Call-Net revenue grew 7% compared to Q1 2004, to $216 million. EBIDTA, cash flow and gross margins increased. Fifty-six percent of revenue in the quarter were from non-long distance business. Net loss was $13 million, down from $30 million a year ago. Call-Net added 30,000 new local lines in the quarter, to total 336,100 residential and 159,000 business lines.

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