Great Expectations: FCC License Energizes Teleglobe's Global Ambitions
The Canadian-based international long distance carrier is ready to take on the world
A license issued earlier this month by the U.S. Federal Communications Commission is expected to dramatically strengthen Teleglobe Inc.'s position in the global telecommunications market.
Nearly one year ago, the Montreal-based Teleglobe ., established a unit in McLean, Va. As the ninth largest international long distance carrier, Teleglobe's newly issued FCC license is expected to help drive the unit's international expansion.
The license will now allow the unit, known as Teleglobe USA, to service international traffic to and from the United States as a reseller and facilities-based carrier.
Teleglobe, which has been a U.S. reseller of international long distance since July, has already signed on more than 20 American long distance providers. Teleglobe makes its money selling access to its communications network to carriers such as LCI or other mid-sized companies that don't have the capital to build their own infrastructure.
The company's president said the company is well-positioned in the $83 billion global long distance market.
In 1995, Teleglobe carried 1.5 billion minutes of long distance service to and from Canada and 150 million minutes of non-Canadian traffic. In 1996, the company will carry 400 million minutes of non-Canadian traffic, said Bruce Roberts, a stock analyst with Furman Selz in New York.
"This license is giving us access to compete for U.S. customers," said Paolo Guidi, president and chief executive officer of Teleglobe USA.
Guidi's plan now is to target carriers in Western Europe and Latin America. "We [will] be active in every country that is focusing on deregulating," said Guidi.
"In five years, we will be doing business in 50 or more countries," he said.
The license will boost the company's stocks, which are traded on the Montreal Exchange, the Toronto Stock Exchange and the Vancouver Stock Exchange, according to Roberts. Teleglobe, which is currently trading for $20.50 per share, will jump to $27.20 in the next year, he said.
Teleglobe, established in 1986, provides intercontinental telecommunications. Its subsidiaries include Teleglobe Canada, Teleglobe International Corp., Teleglobe World Mobility, Teleglobe Enterprises and Teleglobe Insurance Systems.
For the six-month period ending June 30, net income for Teleglobe Inc. was $47.7 million compared with $37 million in 1995. Total revenues for the first six months rose to $805 million from $772.1 million a year ago.
Teleglobe USA was formed last December to create a presence outside of Canada. Guidi, who joined the company in 1995, had served as president of Sprint International for five years. He began his career with GTE Corp. where he held several management positions in Europe, Latin America and the Far East.
Teleglobe established its U.S. headquarters in Washington to be close to the telecom carriers, the FCC and Internet companies, according to Guidi.
"We viewed the area as the center of a central advanced communications industry with a significant amount of global activity," said Guidi. "There is also a market for finding employees here."
Unlike many of its competitors, Teleglobe USA is focusing on one service -- long distance, Guidi said. Other companies are trying to become supercarriers by offering services such as cellular, local telephone, Internet access and cable.
Guidi doesn't want the company to become a national brand for services other than long distance. His goal is to sell the company's long distance capabilities to the reseller that already has a national brand name. For example, the company sells long distance service to companies such as LCI in McLean, Va., now one of the top five U.S. long distance service providers.
"We'll find ways into the customer, but not through national television," said Guidi.
Roberts said the reason Teleglobe will be able to succeed in this market is because it is not targeting the end user. For example, companies such as MCI are unable to make their money targeting resellers because they are targeting the same customer base as the reseller - and the resellers don't trust them, he said.
"On average there are 13 phones to every 100 people in the entire world," said Roberts. "There is tremendous potential for Teleglobe."
Roberts said Teleglobe's growth in the next few years will depend in part on its ability to manage traffic among countries outside the United States and Canada.
"The company is leaving home and really coming of age," said Roberts.
He predicts Teleglobe will move from the ninth largest international long distance carrier to the No. 5 slot in the next five years.