TELECOM REPORTER
Prime real estate is becoming a strategic asset in the battle for wireless customers, with Telus Corp. becoming the latest phone operator to boost its footprint in shopping malls across the country.
The company is expected to use its purchase of photography retailer Black Photo Corp. Ltd. to sell its wireless products exclusively and fend off greater competition in the marketplace.
Such a move would be similar in strategy to BCE Inc.'s Bell Canada, which bought the national electronics retailer The Source this year and plans to stock the shelves with its own phone and TV offerings.
Vancouver-based Telus said it paid about $28-million to acquire Black's from ReichmannHauer Capital Partners, which had owned the national chain for two years. Although the sum represents a relatively small investment in the telecom industry (about the same amount as Bell awarded its top two executives last year), the deal will help Telus beef up its store presence in Ontario, home to 81 of the 113 Black's stores.
Similar to its rivals, Telus sells wireless services through three physical channels, its own Telus-branded stores, commercial dealers that focus on businesses and third-party retailers such as Future Shop.
Telus, Bell and Rogers Communications Inc. are all looking for an advantage as pricing becomes more aggressive and new players - such as Globalive Wireless Management Corp. and cable company Vidéotron Ltée - prepare to enter the wireless market in the coming months.
"Distribution is becoming more important because there's more competition," said Dvai Ghose, an analyst with Genuity Capital Markets in Toronto.
Black's sells cameras, photography accessories and printing services. While the deal with the 79-year-old retail chain may initially appear to be off base for a phone company, Robert McFarlane, executive vice-president and chief financial officer of Telus, said it's actually a natural fit.
Quality digital cameras are now an embedded feature of most mobile phones, he said. "There's a convergence going on between photography and wireless and Black's is particularly well suited to take advantage of that."
Mr. McFarlane said Telus will keep the Black's brand and the firm's management, but he would not provide details on the strategy for selling phones. The acquisition "provides opportunity to be exclusive," but Telus and Black's management have not yet decided what the new mix of products should be, he said.
The spotlight now moves to the new wireless entrants and to Rogers. One of the biggest challenges for the new entrants will be establishing distribution channels through which to sell their services. In adding hundreds of new stores for their own sales, Bell and Telus have also moved pre-emptively to shut the new players out of two national retail chains.
Rogers maintains one of the biggest retail channels in the country but must still find a way to make up for the approximately 100,000 new wireless subscribers it gained each year through its exclusive partnership with The Source. That deal expires at the end of the year, at which point Bell will replace Rogers' wireless products with its own.
Mr. Ghose estimates that about 5 per cent of Rogers' new wireless subscribers each year came from the national retailer. He forecast that Rogers, or either of its competitors, could raise the stakes by attempting to acquire Glentel Inc.'s WirelessWave, which sells Bell and Rogers products through a network of about 100 stores in British Columbia, Alberta, Manitoba and Ontario.
© The Globe and Mail
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