Canada’s telecommunications giants — Alberta-born Telus Corporation and Bell Canada — are betting their futures on the Internet as they battle to be the country’s top telecom player.

Telus will launch multi-million-dollar “Internet hosting centres” in Calgary and Toronto, Bell’s backyard, in July.

The centres will expand Telus’s capability to provide state-of-the-art Net-based services to firms ranging from small businesses to large corporations.

Bell is firing back with its wireless division, Bell Mobility. It will begin operations in the West this fall, to challenge Telus’s reign over wireless on its home turf.

Larry MacDougal, Business Edge
Welcome to the Bat Cave — that's what Calgary's TELUS employees call the technical operations centre.

Bell also recently established three Western-tailored city Web sites, CalgaryPlus.ca, EdmontonPlus.ca and VancouverPlus.ca, to capture Net customers. Both companies’ aggressive strategies to dominate the converging areas of voice, wireless, high-speed data and Internet services will shape the telecom sector’s development in Canada, industry players and analysts say.

“In terms of industry structure and competition, the real big contest in the main tent is between Bell and Telus,” says Lawrence Surtees, senior telecom analyst at IDC Canada Ltd. “They have a huge base to fund their expansions.”

Telus, which started life as Alberta Government Telephones and was once owned and operated by Bell Canada, makes no secret of its ambitions.

“We are moving on a number of different fronts to become a national player in Canada,” says John Maduri, executive vice-president of Telus and president of Telus Business Solutions.

In wireless, Telus Mobility increased its customer base by 100,800 in the first quarter of this year, up 19 per cent from the same quarter last year. Telus led all wireless providers in capturing 29 per cent of new customers, Maguri notes.

“I can tell you that we are winning business in Ontario and Quebec.”

Bell Canada boasts that it added 114,000 new cellular and PCS (personal communications services) customers in the first quarter of this year, up 133 per cent from the same quarter last year. Bell has 3.6 million cellular, PCS and paging subscribers, and is “the largest wireless carrier in Canada, despite the fact that we are only beginning to expand into Western Canada,” Jean Monty, chairman and chief executive of parent firm BCE Inc., recently told shareholders.

Bell is investing heavily to build a digital wireless infrastructure to cover Alberta and British Columbia, in advance of launching Bell Mobility services this fall.

But Maduri counters that Telus Mobility in the West has an extremely strong dealer network, high levels of customer satisfaction and a dominant market share. “I think they (Bell) are going to see that competing against Telus Mobility in Western Canada is quite challenging.”

Wireless will be a “huge fight” in the telecom giants’ battle, analyst Surtees says. “Wireless will have a huge revenue and is one of the big growth drivers in telecom.”

Calgary-based Telus Mobility vaulted into Canada’s No. 2 position (next to Bell Mobility) in wireless subscribers with its $6.6-billion purchase last year of Clearnet Communications Inc. The Toronto-based wireless service provider’s existing network and ample bandwidth brought Telus a potential customer base of more than 30 million subscribers. Prior to buying Clearnet, Telus also purchased a stake in QuebecTel.

Analysts praise the Clearnet acquisition, masterminded by recently appointed Telus chief executive Darren Entwistle — described in industry circles as a 38-year-old “wireless wunderkind.”

“It gives (Telus) brand recognition right across the country,” says Ian Angus, president of Angus Telemanagement Group. “It gives them one of the largest contiguous wireless networks in the country.”

Entwistle also showed remarkable insight in making Clearnet chief executive George Cope — recognized as one of Canadian telecom’s geniuses — the head of Telus Mobility, analysts say.

Another crucial front in the battle will be in providing Internet conductivity and applications, from connections into the home to high-speed data links for businesses.

Telus is challenging Bell for this lucrative market in Bell’s backyard. “There are big billboards here in Toronto on the Gardiner Expressway advertising myTelus.com, myToronto.com from Telus,” Surtees says. “They’re going toe-to-toe in that space against (Bell family member) Sympatico-Lycos.”

Internet business services and applications are far from being dead, despite the dot-com crashes in the stock market, Telus’s Maduri says. “What we are seeing is that the Internet is real, that the needs for Canadian companies to communicate and be Web-enabled or Internet-enabled are real. And that is creating a considerable demand for our new data and IP services.”

Telus’s soon-to-be-opened 150,000-sq.-ft. Internet hosting centre in Calgary will provide customers with highly secure, round-the-clock e-business services including managed software applications, Web-site hosting, and audio and video streaming.

Telus also recently “lit” up its new national fibre-optic backbone for high-speed broadband services. The company is building new high-speed DSL (digital service line) networks in 38 communities in Alberta and B.C., as well as expanding in Bell’s Ontario home turf.

Maduri describes the strategy as a “full-tilt, all-out effort to dominate and win the DSL — the broadband, high-speed connection to the home — battle.”

The effort includes a capital expenditure budget of more than $2 billion next year. “And $2 billion buys lots of network,” Maduri says.

Bell, for its part, is moving just as aggressively into Telus’s territory. It purchased a 20-per-cent interest in Manitoba Telecom Services and with MTS formed Bell Intrigna, which serves business customers in B.C. and Alberta.

“Today, all roads lead to the Net,” BCE’s Monty says. “BCE has entered the converging worlds of Internet communications, and we’re not looking back.”

BCE, through its national broadband company, Bell Nexxia, added 130,000 high-speed Net customers in the first quarter of this year and now reaches a total of 466,000 clients, Monty told shareholders.

The conglomerate’s Western operations, including Bell Intrigna, Bell Nexxia, Bell Mobility and content-providers like CTV and The Globe and Mail, now employ some 900 people.

BCE also is investing $1.5 billion to roll out its high-speed Internet service to the vast majority of its residential and business customers in Ontario and Quebec.

At Telus, the attitude is: Not if we get there first.

Earlier this month, Telus announced it was buying Toronto-based Internet services company Daedalian eSolutions in an all-stock deal worth about $29 million.

The 20-year old company helps build Web sites and expand corporate Internet operations such as electronic commerce, data storage and Web hosting. Its revenues last year were about $22 million, with clients including Bank of Montreal, the city of Toronto and several Ontario government ministries.

The deal follows Telus’s purchase in April of Columbus Group, another Internet services firm.

The new Net-driven acquisitions are all part of the strategy to make Telus a national full-service telecommunications provider, Maduri says. “We’re fundamentally looking at the solutions that solve problems for customers, not just provide conductivity.”

So, is Canada’s expanding telecom convergence market big enough for two giants? Forester Research forecasts a volume of $272 billion a year in business-to-business transactions in Canada by 2005, representing about 18 per cent of all B2B transactions.

In wireless, worldwide sales of mobile phones are predicted to exceed 500 million units this year, a 23-per-cent increase over last year, according to the GartnerGroup.

And in the Internet market, the International Telecommunications Union estimates that the number of worldwide Net users will top 600 million by 2002, compared with 385 million in 2000. The data market is growing by 31 per cent a year.

“The market is big enough for the two players,” says Dean Kim, research analyst at Accumen Capital Finance Partners Limited in Calgary. “Now it’s a matter of who’s going to get which slice of the pie.”