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Bruce Telecom faces $500,000 shortfall
By Liz Dadson

Kincardine Council/Internet & Technology

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Bruce Telecom is facing some difficult times as outlined by chief financial officer Laurel Stein and chief executive officer Mike Andrews.

Speaking to Kincardine council in committee-of-the-whole Nov. 18, Stein said that revenue performance is off-budget by about $500,000 to the end of September, with less than stellar results for Bruce TV and Internet services.

However, she noted that expenses are also below-budget, as the municipal phone company winds down the final quarter of 2009. "We won't end the year too significantly below plan," she said. "Revenues are down due to the economic climate."

Stein said expenses were budgeted at $14 million for 2009, but are at only $10 million. The budget called for $16 million in revenue by the end of this year, and $14.5 million in expenses, leaving a profit of $1.5 million, she said. However, revenue is going to be more like $15.3 million ($700,000 below plan), and expenses will be about $14 million ($500,000 below plan), she said, leaving an operating surplus of $1 million to $1.3 million.

"Our balance sheet has been strengthening over the past year," said Stein, noting the company has sold off a good portion of its inventory, and has made the final payment of $400,000 to the municipality for its 2008 commitment.

Andrews said it's not all doom and gloom as the company is nearing completion on its Bruce Mobility program which should be to the market by early 2010. However, Bruce TV is well behind target as the company faced several challenges rolling that out. The Fibre-To-The-Home program has seen 70 per cent of its protected base in Southampton completed, and 50 per cent of the Competitive Local Exchange Carrier (CLEC) base. Bruce Telecom is now connecting customers to that program in Port Elgin and Kincardine

There are significant challenges, said Andrews, beginning with regulatory changes, effective Jan. 1, 2010. Plus, Bell Canada has applied for a co-locate in Port Elgin and Kincardine, meaning a loss of revenue from dedicated circuits and toll trunk revenue, he said. "We have to accommodate Bell under regulations dictated by the CRTC (Canadian Radio-television and Telecommunications Commission)."

 The incumbent cable TV provider has applied for CLEC status in Port Elgin and Paisley, he said. And there's the loss of telephone, Internet and TV subsidies next year.

The competition is fierce, with many more players, and it's going to heat up in 2010, said Andrews. "The revenue shortfall from regulatory-related changes will be in the range of eight to 10 per cent of the 2009 revenue. The marketplace has changed. We're into a competitive world."

"Half-a-million short on the budget is worrisome," said councillor Randy Roppel.

Andrews said the company has made a concerted effort to control expenses this year.

Roppel said Bruce Telecom has a lot of money tied up in inventory. "If it is outdated equipment, what happens to it?"

Andrews said the company is trying to use the equipment or sell it off. "It's like buying computers," he said. "They get outdated quickly. We're working to address that."

Councillor Marsha Leggett asked what the process is to get an accurate valuation of Bruce Telecom.

Andrews said there are various processes, but the municipality would have to look for outside expertise to get that information.

"Is the time right for the municipality to sell Bruce Telecom?" asked Leggett.

"I'd prefer not to answer that in open session," said Andrews.

"I'm surprised Randy (Roppel) made that comment about computers becoming obsolete, he doesn't even have one," said councillor Gordon Campbell. "I hope the board is not going on those free trips to Hawaii."

"No," said chairman Richard Martin.

"We're controlling expenses this year," said Andrews.
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Friday, November 27, 2009