Microcell maneuvers for profitability

Microcell Telecommunications Inc. has laid off 180 employees across Canada in what the company says will be its last major restructuring move for the foreseeable future.

The layoffs came from its Microcell Solutions division,

mostly in sales divisions, according to company spokesperson Victoria Ollers. Last fall, Microcell let go of 194 workers from its Connexions and Telecom companies.

“”Both of these (layoffs) are part of the same plan and this is the conclusion of the plan,”” said Ollers.

More details on the company’s business plans for 2002 will be revealed when it announces its fourth quarter results on Feb. 12. Microcell posted net losses of $120 million for the third quarter ended Sept. 30, 2001 compared to $114 million for Q3 2000.

In an effort to cover its capital requirements until the end of 2003, Montreal-based Microcell has raised $450.6 million through equity financing and bank commitments. Microcell CEO Alain Rheaume said last July that the company would have to raise between $300 and $400 million to see it through the next few years.

“”The business plan for 2002 was set up given the (poor economic) environment and what we foresee to be in the future and what we’re going to need,”” said Ollers. “”I can’t say too much more than that. Our competitors would like to know more too, and that’s the problem.””

Microcell will continue to face some staunch competition (principally from Rogers AT&T Wireless, Bell Mobility and Telus Mobility) this year, according to Yankee Group in Canada analyst Jeremy Depow. The company is the only remaining independent national PCS carrier in Canada after Telus bought Clearnet Communications in 2000, and it doesn’t have the cash reserves of the larger, more established telco players.

“”They do have to raise a significant amount of money to get through this timeframe until they can improve things. (The) $450 million will certainly help,”” said Depow, adding that the recent layoffs are another example of improving cashflow. “”Hopefully that won’t continue, but they’re going to have to do anything they can to stay alive. I think they’ll make it, but they do have some difficult choices to make.””

Microcell was the first Canadian provider to launch a national GPRS (General Packet Radio Service) network last year, but Rogers AT&T is hot on its heels. This may add to the squeeze, said Giga Information Group analyst Brownlee Thomas, based in Montreal.

Microcell made a name for itself through the competitively-priced consumer brand Fido. Rheaume said last year that the company would attempt to drive revenue by branching out into corporate markets, but that’s a strategy that may not pan out, said Thomas. “”I’m not sure their products are conducive to that because their coverage is very much of an urban coverage . . . If you’re on the road you’re not going to even consider Microcell because you can’t roam, whereas with the others you can.””

Content may be what keeps the company afloat, according to Depow, who said that things like downloading ring tones and text graphics have been a good source of revenue generation.

There are no more layoffs planned to 2003, said Ollers, and those already laid off may have a shot at working at Microcell again. Ex-employees are placed on an availability list and are considered for rehire. A number of employees from the 2001 layoffs have been hired back, but Ollers wouldn’t specify how many.

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