Slide 3 Notes:
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Who will succeed? I wish I were actually that good at picking winners. A friend of mine wanted to buy stock for the first time. He had mutual funds but had never bought an individual company’s shares – BCI was trading low a couple months ago and I told him that I though it was under valued and so he bought some and I bought some. Now that he has made more than 50% in two months – he wants me to pick another stock for him. My friend has learned the upside of the stock market – usually my picks aren’t that good.
Still, there are a few Canadian companies that I like the looks of how they are positioned for the coming of international competition.
Cost competitiveness has been better achieved by small and nimble companies in the international world. Companies like Pacific Gateway Exchange pioneered creative routing in the US. In Canada, North American Gateway is the company that we all have to thank for creating the current Canadian interim competitive international regime.
Fonorola is implementing an interesting transborder strategy with a national fibre backbone backed up through the United States. Fonorola has been able to establish good wholesale relationships for northbound traffic and should be able to translate this success into brokering competitive overseas rates. It will be interesting to see if the proposed merger helps this continue to develop or whether the management uncertainty pushes the companies into a 3 to six month period of stagnation. News releases last week indicate that Fonorola has commissioned its first international gateway switch and has major deals in place for fibre capacity in the US.
AT&T Canada and Stentor may find that they are able to benefit most by sitting on the sidelines and watching the prices go down. AT&T has even better flexibility than Stentor – they are not bound by any volume commitments to Teleglobe. There is nothing like being a customer when competition is emerging. And customers such as AT&T and Stentor will be able to command deep discounts and push for responsiveness from their international services suppliers.
Finally, there are the exporters of Canadian know how: Bell Canada International has been heavily active on the global investment side.
I can also foresee more activity coming from the Western companies. MTS and Saskatchewan are landlocked in areas that have less than stellar economic growth prospects. Put yourself in their shoes: Starting with 100% marketshare and watching competition arrive can be scary if you don’t find a way to grow the revenue base. In their cases, both Manitoba and Saskatchewan are looking outside the country to grow the revenue base. Telus’ recent wanderings from the fold indicates the frustration some of the Stentor members may be feeling when revenues are stagnating or declining. With Bell moving into the fringe of their territories I would expect to see forays into off shore opportunities by the smaller companies. This would give them the ability to expand revenues without going head to head against Bell.
The manufacturers Nortel and Newbridge are going to continue to enjoy tremendous growth opportunities as the world embraces more explosive growth. Everyday, we read about new investments in emerging markets. Nortel and Newbridge are leaders in their products and will continue to benefit from the pie getting bigger.