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

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BCE is now ready for the Internet age. With all the pieces in place, we're turning our sights on making it all work together. Our strategy is to leverage our unrivaled customer connections with compelling content and powerful e-commerce applications.

History of BCE Inc.

BCE Inc. operates as Canada's largest communications company with over 22 million customer connections through its content, commerce, and connectivity-related ventures. BCE's core businesses include Bell Canada, in which it owns 80 percent--Ameritech and its parent SBC Communications Inc. owns the other 20 percent--Teleglobe, a connectivity, content distribution and Internet hosting company; Bell Globemedia, whose business ventures include Canadian private broadcaster CTV, newspaper The Globe and Mail, and Web portals Sympatico-Lycos and Globe Interactive; and BCE Emergis, an e-commerce product and services provider. BCE also invests in leading technology-based companies including BCI, CGI, Look Communications, and Telesat Canada through its BCE Ventures arm.

Early History

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 percent 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 percent 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.

Expansion: 1950s-60s

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 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-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.

The Formation of Bell Canada Enterprises Inc.

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 provided 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 percent 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.

Aggressive Expansion Leads to Divestiture

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 percent.

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 made crucial contributions to the success of their parent company, many of them were successful enough to warrant widely recognized reputations of their own. While Bell Canada, the country's largest telecommunications company, provided most of the firm's services in that area, for example, Northern Telecom Limited was responsible for the manufacturing end of the business and was the second-largest such company in North America. BellNorthern Research, the largest private industrial research and development organization in the country, also played a vital role in BCE's research and development activities, while financial services were provided by Montreal Trust.

While BCE hurdled a major challenge in its 1983 restructuring, it underwent a series of additional changes in the 1990s as the atmosphere in the telecommunications industry became increasingly competitive. In fact, BCE's earnings in the early 1990s were less than spectacular--they fell dramatically from C$1.2 billion reported in 1994, to C$782 million in 1995. Bell Canada, responsible for nearly 50 percent of the company's earnings at the time, faced increased competition due to deregulation in the long distance phone industry. Its market share had fallen by nearly 22 percent in 1994, as companies, including Sprint Canada Inc. and Unitel Communications Inc., entered the fray, vying for a piece of the Canadian long distance market.

At the same time, Northern Telecom--renamed Nortel in 1995--was also facing increased competition, especially in foreign markets where it hoped to boost sales related to wireless operations. The firm was known however, for its central switches--a market that reached maturity in the late 1980s. While Nortel faced an uphill battle trying to break into the foreign wireless technologies sector, most of BCE's businesses were in similar fights for market share.

A Shift in Focus: Late 1990s and Beyond

In 1996, Rob Osborne, an executive from Maclean Hunter, was named president of BCE after being hired in 1994. Under his leadership and that of CEO and chairman Lynton Wilson, BCE began its turnaround, securing C$1.15 billion in profits in 1996, a substantial increase over 1995 figures. In fact, a 1997 Canadian Business article claimed that BCE had been "overweight, unfocused, and slow to budge" during the late 1980s and early 1990s, but that "over the past few years, spurred by new competition, the obese giant has pulled off an amazing transformation." The article also stated that "the newly buff BCE is emerging as the dominant player in areas that range from old standbys such as local phone service and long-distance communications, to nascent gold mines such as Internet access."

While it cleaned up its image and shed businesses unrelated to its telecommunications focus, BCE also underwent a series of management changes. During 1997, Jean Monty, the CEO of Nortel credited for its rebirth in the 1990s, was named chief operating officer and president of BCE, while Osborne moved over to head up Bell Canada. Then in February 1998, Osborne resigned unexpectedly from Bell to take over operations at Ontario Hydro.

Amidst the management reshuffling, the CRTC decided in 1997 to allow phone companies to enter the cable-TV market, opening up a potentially lucrative market for BCE. In turn, communications firms could now enter the local calling markets. During this time period, the landscape of the telecommunications industry as a whole began to change dramatically due to consolidation and merger activity. Deals including Worldcom Inc.'s purchase of MCI Communications Corp. and Telecport Communications Group Inc.'s acquisition of ACC Corp. threatened Bell Canada's hold on the local calling market in Canada.

As such, BCE forged ahead with its plans to enter the world of Internet and e-commerce. In 1998, the company created Bell Nexxia, a national broadband company, and BCE Emergis, its entrant into the e-commerce arena. Meanwhile, Nortel acquired Broadband Networks Inc., a leading manufacturer of fixed broadband wireless communications network. It also purchased leading IP networking firm Bay Networks in 1998, changing its name to Nortel Networks after the purchase. In order to gain a stronger foothold in North American markets, BCE sold a 20 percent stake in Bell Canada to Ameritech in 1999.

BCE made several key moves during 2000 that signaled the firm's commitment to its telecommunications and e-commerce businesses. It gained a majority ownership in Aliant Inc., a telephone carrier serving Canada's four Atlantic provinces. It also acquired CTV Inc., Canada's leading private 18-channel television network, and then joined with The Thompson Corporation to create Bell Globemedia. This new venture brought under one corporate structure the operations of CTV, the Globe and Mail, and Sympatico-Lycos and Globe Interactive, two leading Web portals. The company also acquired Teleglobe Inc., a global data and Internet services provider.

While BCE was beefing up its media and Internet-related holdings, the company decided it was time to let go of its networking business. After over 100 years of operation together, BCE cut Nortel loose in 2000, selling off 94 percent of its stake in the firm to shareholders. Nortel became an independent global company after the sale--a position that management felt would lead to future growth.

By 2001, BCE had reorganized its operations into four operating units including Bell Canada, Teleglobe, Bell Globemedia, and BCE Emergis. Its other interests were combined into BCE Ventures, a unit responsible for equity investments in technology firms including Bell Canada International, CGI Group, and Telesat. Having successfully battled the increased competition brought on by changing regulations in the telecommunications industry, BCE had emerged as a leading communications, media, and e-commerce-based company. While the industry would no doubt continue changing in the future, BCE appeared to be well positioned for growth in its core business sectors.

Principal Subsidiaries: Bell Canada (80%); Bell Globemedia (70.1%); BCE Emergis (66%); Bell Actimedia; Bell Expressvu; Bell Intrigna (33.3%); Bell Mobility; Bell Nexxia; Aliant (52.8%); Manitoba Telecom Services (21.7%); Northern Telephone; Northwestel; Telebec; Teleglobe Inc. (95.4%); CTV Inc.; Globe and Mail; Sympatico-Lycos; Bell Canada International; BCI (73.6%); Bimcor; CGI Group (41.4%); Telesat Canada; BCE Capital.

Principal Operating Units: Bell Canada; Teleglobe; Bell Globemedia; BCE Emergis; BCE Ventures.

Principal Competitors: AT&T Canada Inc.; Rogers Communications Inc.; TELUS Corporation.


Additional Details

Further Reference

"Ameritech Takes On U.S. Rivals in Canada With Bell Canada," Communications Daily, March 25,1999.Austen, Ian, "Telecommunications," Canadian Business, July 9, 2001, p. 106.Corcoran, Terence, "The Old Mindset Behind the New BCE," National Post, September 16, 2000, p. D11.Critchley, Barry, "BCE's Nortel Deal Biggest of Its Kind," National Post, July 8, 2000, p. C2.Demont, Philip, "Osborne's Reputation Put to the Test at BCE," Financial Post, March 9, 1996, p. 12.------, "World Turned Upside Down," Financial Post, December 27, 1997, p. 48.Gray, John, "Waiting for the Wave," Canadian Business, May 14, 2001, p. 30.Hardin, Helen, "Bell Canada Marks its 100th Year by Helping Others," Telephony, April 28, 1980."Jean Monty," Telecommunications, October 1999, p. C9.Onstad, Katrina, "Chomp!," Canadian Business, May 1997, p. 56.Taylor, Peter Shawn, "Here Today, Jean Tomorrow," Canadian Business, March 13, 1998, p. 87.Venetis, Tom, "BCE Drops Bombshell," Computer Dealer News, September 21, 1998, p. 1.Wickens, Barbara, "Tough Times for Ma Bell," Maclean's, July 30, 1990.

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