Canada's Teleglobe Is Gaining A World, Not Losing A Monopoly
Charles Sirois, CEO of Canada's Teleglobe Inc., rather likes the idea of doubters comparing him to a "turkey voting for Thanksgiving." For years, he has been begging Ottawa to abolish his company's monopoly on Canadian overseas phone traffic, arguing "the sooner we leave it behind, the better." But skeptics see that as a dangerous game, since ending the monopoly would give the likes of AT&T Canada an open shot at Teleglobe's market.
It now looks as if Sirois will get his wish. As part of the World Trade Organization's push to open the global telecom market, Canada says it's willing to end Teleglobe's monopoly in 1998. While that will hurt Teleglobe in Canada, which accounted for most of its estimated 1996 sales of $1.3 billion, Sirois figures that such losses can be offset--and then some--by adding overseas customers. Since October, Teleglobe has gotten approvals to sell its services in Britain, Germany, and the U.S. And as new markets open up, Sirois expects the company, ranked 19th as a carrier of international traffic in 1995, to emerge as one of the winners.
Sirois believes Teleglobe's agility and focus on intercontinental service will give it an edge over its far larger rivals abroad. Teleglobe is well positioned. Its undersea-cable and satellite network reaches 240 countries and territories, and it has enough capacity to "double the amount of traffic we carry without major investment," says Sirois.
To help meet his goals, he has brought in Paolo Guidi, former head of Sprint International, as his chief salesman. As president of Teleglobe International, Guidi is pitching its global network to the Baby Bells and other emerging carriers that might fear giving the business to such potential competitors as AT&T, MCI, and Sprint. Unlike them, Teleglobe doesn't compete in domestic long-distance markets. Guidi is also pushing advanced services, recently winning a $25 million contract to build an Internet link between Singapore and the U.S.
Still, it's an audacious gamble. Even Sirois' closest friend, Northern Telecom CEO Jean C. Monty, cautions that Teleglobe "can't take on [such giants as] AT&T or Sprint head-on." But, he adds, "I [am] betting on him." So is the market. In the past year, Teleglobe stock has doubled, boosting its market value to $1.6 billion, five times what it was when Sirois took control in a 1992 proxy fight, and it may soon be listed on the New York Stock Exchange.
The 42-year-old Sirois moves fast. In 1980, as a newly minted MBA from Laval University, he bought his father's Quebec paging outfit for $150,000. From that base, Sirois, who relaxes by skiing, scuba diving, and riding motorcycles, has built his holding company, Telesystem Ltd., into Canada's largest private telecom venture. Sirois, whose stake in Telesystem is worth $500 million, now manages $3 billion in assets. Besides Teleglobe, there's Microcell Telecommunications, a Canadian personal-communications-systems venture, and Telesystem International Wireless, with projects from China to Mexico.
RIVALS CIRCLING. Shortly after taking over Teleglobe, Sirois concluded that telecom deregulation was "a wave that no one can stop." The U.S. is largely open, while Brussels has set a 1998 deadline for opening Europe's markets. If the WTO talks succeed, the $50 billion international services market "should at least triple" as competition drives down prices, predicts Donald H. Gips, chief of the international bureau at the U.S. Federal Communications Commission.
Sirois' global strategy seems to be paying off. Non-Canadian traffic accounts for 28% of Teleglobe's total revenues, up from 3% in 1992. By 2000, Sirois predicts, two-thirds of his business will come from overseas customers. Blistering global growth helped hike profits 36%, to $63 million, during the first three quarters of 1996.
But Sirois will have to watch his back in Canada. With the clock ticking on Teleglobe's monopoly, rivals are circling. Before now, Teleglobe has "never had to offer competitive pricing," says Juri Koor, chairman of Sprint Canada. "Unless they're willing to offer deals, they'll lose share." Yet if Sirois hadn't gone global, he would now be at risk "of being squeezed into a totally unacceptable corner," according to Monty. By accepting the inevitable, Sirois may have Teleglobe better prepared than many other telecom monopolies to survive a global shootout.