BCE INC. - Company Profile, Information, Business Description, History, Background Information on BCE INC.



2000 McGill College Avenue Suite 2100
Montreal
Quebec
H3A 3H7
Canada

History of BCE INC.

The history of BCE Inc. can be traced to Canada native Alexander Graham Bell's early communications experiments, which eventually led to the formation of Bell Telephone Company of Canada. Chartered by the Canadian Parliament on April 29, 1880, the company, known informally as Bell Canada, would spend the next 100-plus years growing and diversifying into one of Canada's largest and most successful organizations; in fact, by 1983, Bell Canada could be described as both a telecommunications company and a holding company, with controlling interests in more than 80 other organizations. A move to create a new parent company, Bell Canada Enterprises Inc. (BCE), in 1983, left Bell Canada and its other businesses as subsidiaries of a new holding company. The move also changed the course of history for BCE Inc.

The Canadian phone company's history began in the late 1870s, when Canada's first telephone exchange opened in 1878 in Hamilton, Ontario. Toronto's came second, in 1879. In 1881 the company had exchanges in 40 cities. By 1890 the firm was offering long-distance service over 3,670 miles. From early on, the firm used the slogan, "A telephone business run by Canadians for Canadians."

Still in its infancy, the telephone industry differed greatly from that which most countries know today. Initially telephone service was offered only during business hours to about 2,100 telephones. Business owners could use the service by buying pairs of instruments to communicate from home to office, from office to factory, or between other pairs of locations. In 1890 the company began to offer evening and Sunday service.

Although United States-based American Telephone and Telegraph Company (AT & T) owned 48% of Bell Canada's stock in 1890, Canadians began buying more of that stock as the company grew. In 1895 Bell Canada incorporated its manufacturing arm, Northern Electric & Manufacturing Company Limited, which was partly owned by AT & T's Western Electric.

Early telephone operators were also different from those known today. In Telephony, April 28, 1986, one of those early employees recalled her first days as an operator in 1924. They were times characterized by hard, fast, manual work, usually lasting six days a week. The operators worked on Christmas, all summer long, and without paid sick days. For this, starting pay was C$11.50 per week. In 1924 Bell Canada introduced the dial exchange, so users could dial a party directly without waiting for an operator to come on the line.

By 1925 the company was well on its way to living up to its motto, as Canadians owned 94.5% of its stock. The late 1920s saw several advances, including a phone service that linked Canada to Britain via the United States; a carrier system; and, in 1931, the formation of the TransCanada Telephone System. The following year the system made possible the first long distance call from Montreal to Vancouver via an all-Canadian route. In 1933 the U.S. federal securities act ended AT & T's right to purchase new shares.

During the Great Depression, the need for telephone service dropped substantially. Operators worked only three days per week--about half the hours they had put in previously. When World War II began all operators were summoned back to work. Following the war, in 1945, Bell Canada installed its one millionth phone. In 1954 Bell Canada merged two subsidiaries, Eastern Townships Telephone Company and Chapleau Telephone System. In 1956 the company merged with Kamouraska Telephone Company and expanded once again in 1957, when it acquired Mount Albert Telephone Company Ltd. Also in 1957, Bell Canada acquired most of Western Electric's share of Northern Electric, which Western held through a subsidiary, Weco Corporation. In 1964 it bought the remainder. By 1958 customers in Canada and the United States could dial other telephone users directly, without going through an operator.



Bell Canada acquired Madawaska Telephone Company in 1960. It gained control in 1962 of Avalon Telephone Company Ltd., which would later be known as Newfoundland Telephone Company Ltd. The following year, Bell Canada bought Monk Rural Telephone Company, changing its name to Capital Telephone Company Ltd. in 1966. Also in 1966, Bell Canada gained a new general counsel, A. Jean de Grandpre, who would soon become a major leader in the company's growth and diversification. A Montreal native, de Grandpre graduated from McGill University in 1943, with a degree in law. He brought two decades of experience gained in his own law practice. Under his leadership, the firm grew rapidly through capital expansion and acquisition. In 1970, for example, the firm acquired control of Oxford Telephone Company Ltd. and Caradoc Ekfrid Telephone Company Ltd., as well as an interest in Telesat Canada, a communications satellite operation. The following year saw the founding of Bell-Northern Research Ltd. (BNR) to consolidate the research and development efforts of Northern Electric and Bell Canada. By 1973 de Grandpre had risen to the post of president of Bell Canada. Three years later, de Grandpre became chairman and chief executive officer.

In 1973 Bell Canada sold a portion of Northern Electric to the public, and in 1976 Northern Electric changed its name to Northern Telecom Limited. Also in 1976, Bell Canada created Bell Canada International Management, Research and Consulting Ltd. (BCI). The firm, which succeeded Bell's Consulting Services Group founded in the mid-1960s, was designed to offer expertise in telecommunications management and technical planning. Based in Ottawa, BCI's clients included common carriers, private corporations, defense companies, contractors, manufacturers, other consultants, and Northern Telecom. In addition, the firm had business dealings across the globe, including in Africa, the Middle East, Europe, the Caribbean, South America, Saudi Arabia, and the United States. According to Telecommunications, October 1980, BCI "could serve as a case study of transfer of North American technology to other nations, be they underdeveloped, developing, or fully developed." In addition Northern Telecom and Bell Canada formed B-N Software Research Inc. for the research and development of new software. Late in 1978 Bell Canada introduced a fiber(c)optic system developed by Northern Telecom Ltd. Designed to simultaneously transmit telephony, data, and video, the company introduced the revolutionary new system during a video telephone conference call between Toronto and London. In 1981 the software firm was merged into Bell-Northern Research.

By 1982 Bell Canada controlled nearly 80 other companies. Switching control of the organizations, including Bell Canada, to a new parent company would simplify the business, de Grandpre believed. Consequently in 1983 Bell Canada Enterprises Inc., known since 1988 as BCE Inc., was created to act as a holding company for a corporate family whose assets amounted to $15 billion and included Bell Canada itself. By designating most of the company's businesses as separate BCE subsidiaries, Bell Canada was the only company that remained under the regulatory control of the Canadian Radio-Television and Telecommunications Commission (CRTC). This benefit led many critics to believe that avoiding CRTC supervision was the sole reason for the restructure. Such criticism was well founded, as relations between the phone company and the CRTC were not always smooth. In 1978, for instance, Bell Canada signed a C$1.1 billion contract to improve Saudi Arabia's telecommunications network. Although the contract did not involve any telephone service to Canadians, the CRTC ruled that profits from the venture must be considered when determining Canadian phone rates, which meant smaller rate hikes for Bell Canada. Still, de Grandpre argued that the purpose of the restructure "was to provide the flexibility necessary for Bell to take on major competitors in telecommunications and microelectronics around the world," reported Maclean's, February 14, 1983.

In addition to leadership and coordination, BCE provides equity investments to further the development of its various businesses and to finance their growth via new products, markets, internal growth, or acquisitions. Also in 1983, BCE acquired a sizeable percentage of TransCanada PipeLines Ltd. (TCPL), a move described in BCE's 1983 annual report as "a significant commitment by BCE to western Canada and to the resource sector of the Canadian economy." Although Radcliffe Latimer, president of TCPL and a personal friend of de Grandpre, cautioned shareholders to ignore BCE's offer of $31.50 per share, BCE still managed to swiftly take over 42% of the company. Following the feud, Latimer admitted defeat and commented in Maclean's, January 2, 1984, "We look at Bell as a first class major shareholder."

BCE's operations then included Bell Canada and several other locally regulated telecommunications operations: Northern Telecom Limited, a telecommunications manufacturer; Bell-Northern Research Ltd., owned by Bell Canada and Northern Telecom Ltd.; Bell Canada International Inc., a consulting firm; Bell Communications Systems Inc.; TransCanada PipeLines Ltd.; Tele-Direct (Publications) Inc., owned by Bell Canada; and Tele-Direct (Canada) Inc.

BCE's growth spurt continued through the 1980s. In fact its assets jumped from C$14.8 billion in 1983 to C$39.3 billion in 1989. There were investments in energy, real estate, printing and packaging, mobile and cellular communications, and financial services. BCE also became the first Canadian corporation to earn a net income of more than C$1 billion. Despite that success, however, other aspects of BCE's business did not fare as well. One such failure was the firm's venture into real estate in 1985, through BCE Development Corporation (BCED), a new subsidiary. The company's experiments with printing and with oil and gas investments also brought poor reviews from shareholders.

BCE managed to succeed, despite these setbacks and several conflicts with CRTC. In 1986 the CRTC held a six-week hearing to examine Bell Canada's profits from 1985 through 1987. As a result, the CRTC ordered Bell Canada to refund to consumers C$206 million worth of excess payments made earlier that year as well as in 1985. In addition the commission forced the company to decrease its predicted profits for 1987 by C$234 million by lowering long distance rates in Ontario and Quebec by nearly 20%.

In 1989 de Grandpre retired as chairman, but remained on the board of directors as founding director and chairman emeritus. J.V. Raymond Cyr, who had been chief executive officer of BCE since May 1988, took the additional post of chairman in August 1989. Bell Canada gained a new president, Jean C. Monty. Cyr faced the monumental task of restoring the faith of BCE's shareholders, who once considered buying stock in the phone company "as safe as Canada Savings Bonds," reported Maclean's, July 30, 1990. To do this, the company decided to take a closer look at the types of businesses best suited to its corporate strategy. It was determined that telecommunications would naturally remain as BCE's core business, but the firm's involvement in real estate was dissolved. It chose to concentrate on financial services and acquired Montreal Trustco Inc., an established firm in that field. It was, however, Bell Canada that brought the most revenue to the parent company. With a record year, Bell Canada contributed C$2.75 per share to BCE's 1989 earnings. In addition, BCE stock continued to be the most widely held stock in Canada.

Six years after taking control of TransCanada PipeLines Ltd., which BCE viewed as a solid, long-term investment, the company decided to sell its stake in the energy business. Owning TransCanada PipeLines was simply not consistent with BCE's core businesses in telecommunications and financial services.

In the early 1990s the holding company BCE Inc. owned subsidiaries in three primary areas: telecommunications services, telecommunications equipment manufacturing, and financial services. Although these subsidiaries make crucial contributions to the success of their parent company, many of them are successful enough to warrant widely recognized reputations of their own. While Bell Canada, the country's largest telecommunications company, provides most of the firm's services in that area, for example, Northern Telecom Limited is responsible for the manufacturing end of the business and is the second-largest such company in North America. BellNorthern Research, the largest private industrial research and development organization in the country, plays a vital role in BCE's research and development activities, while financial services are provided by Montreal Trust.

It seems BCE has already hurdled a major challenge in its 1983 restructuring. As a holding company, BCE must continue to adapt to industry changes.

Principal Subsidiaries: Bell Canada; Northern Telecom Limited (53.1%); Bell-Northern Research Ltd. (30%); Bell Canada International Inc.; BCE Mobile Communications Inc. (69.7%); Montreal Trustco Inc.

Additional Details

Further Reference

Hardin, Helen, "Bell Canada marks its 100th year by helping others," Telephony, April 28, 1980.Wickens, Barbara, "Tough times for Ma Bell," Maclean', July 30, 1990.

User Contributions:

Comment about this article, ask questions, or add new information about this topic: