An overwhelming majority of Look Communications Inc.‘s creditors have accepted its revamped business plan, the first step in emerging from protection under the Companies’ Creditors Arrangement Act.
At a meeting last Friday, 93 per cent of creditors representing 87 per cent of unsecured claims and 100 per cent of secured creditors voted in favour of the Toronto-based company’s Plan of Compromise and Arrangement (PCA). Look will now take the PCA to the Ontario Superior Court of Justice for final approval. Look filed voluntarily for protection on Sept. 4 after a string of financial setbacks and reducing its workforce. On Aug. 9, BCE and Telesystem Ltd. agreed to pay approximate debt of $98 million to various banks.
According to Look, it plans a number of changes to its business strategy to increase its cash flow. It will be focusing on the small- and medium-size business (SMB) segment products and services like co-location and virtual hosting, for example. It will also attempt to grow its digital television customer base in multi-dwelling units. Other plans include converting residential and small office/home office (SOHO) dial-up customers to broadband access. Finally, Look will be investing in its wireless network to support high-speed access growth.
Paul Lamontagne, president and chief operating officer, said one advantage the company would have heading into the SOHO and SMB markets is it already has a foothold in them. He says it currently has more than 14,000 hosting and access customers and its broadband network that reaches more than 300,000 SMBs.
“It’s a unique opportunity to leverage a state-of-the-art broadband network to be able to offer high-speed Internet services to small and medium size businesses, whether they be our own customers or new customers,” says Lamontagne, who joined the company in September.
“We know there’s a huge amount of pent up demand in this market. This is a market traditionally where the penetration rate of high-speed has lagged somewhat,” and adds he expects to see double-digit growth in 2002.
Analysts are cautiously optimistic the market will give Look a second chance. Ian Angus, principal of Ajax, Ont.-based Angus Telemanagement Group., says the demand for high-speed Internet is there, citing Bell Canada’s 180 per cent growth in 2001 for the service.
Another factor in Look’s favour is narrowing its business focus. Angus says it was trying to too many things — television and Internet.
“At the same time it was faced with the problem that suddenly it was owned by a company (BCE) that viewed it as a competitor, so the capital pipes got cut off,” Angus said. “There’s certainly a big desire, especially among independent ISPs, for wholesale high-speed service.”
Angus said there is also the relatively untapped resource of apartment buildings. He says many landlords understand the opportunity to provide high-speed services to their tenants.
While the market seems receptive to the services Look wants to provide, the question is whether they can convince anyone to roll the dice on a company that had a net loss $103.1 million in the third quarter. Angus thinks it can.
“This is going to be a prove it situation: businesses are going to look at them and say, ‘Prove you can do the job,'” Angus said. “Especially in the SOHO market neither Rogers or Bell have exactly established themselves as wonderful, high quality suppliers.”
Elroy Jopling, an analyst with Canadian arm of Gartner Group Inc. agreed Look has a puncher’s chance.
“There’s always going to be reticence for people to go with someone that’s been that close (to financial ruin),” Jopling said. “Is it impossible? I wouldn’t say it’s impossible, but it’s not going to be easy.”