Case
Teleglobe Inc. (TGO)
Case outline
Teleglobe Inc. is a major international telephone and data telecommunication company. Prior to 1998, Teleglobe Inc. had a monopoly on international calls in Canada, but had no retail business. As competition imposed by deregulation lowered unit prices in 1998, Teleglobe's core business of Canadian outbound calls (handled by Teleglobe Communications Corporation, or TCC) experienced a 16% drop in revenue (from US$ 534 millions in 1997 to $ 448 millions in 1998) and an operating loss, even as the total billable minutes continued to rise slightly. With a backbone reaching to 240 countries and world's third largest maritime cable network, doubling of billable minutes in global telephone transmission in 1997 over 1996, and again in 1998 over 1997, pointed to Teleglobe's new field of opportunity. Teleglobe invested heavily in diversifying its sources of revenue.
In 1998, Teleglobe is a transformed company (compared to its prior state of regulated monopoly). The most important transformation resides in its merger with Excel, a long distance retail service provider in the United States. Excel itself had grown to become the fourth US long distance provider but only as a reseller, and in 1997, Excel acquire TelCo which owned switching and cable. The merger between Teleglobe and Excel is perceived as a business combination of equals, yet shareholders of Excel received Teleglobe shares and Excel name disappeared. Teleglobe plans to use Excel's marketing know how to enter the Canadian retail long distance market immediately, and penetrate the retail telecommunication markets of Germany, France, Japan, U.K and other markets where foreign competition is allowed.
Teleglobe' TCC uses its cable backbone to offer internet connectivity for Internet Service Providers in 90 countries, and plans to deploy its own POP's throughout North America. This market is growing very fast.
Teleglobe holds a 50% ownership interest in ORBCOMM Global L.P. which placed 28 low-earth orbit satellites offering two way digital data and messaging communication for 160 million potential customers. A large number of applications are anticipated using the satellites. Teleglobe has also taken ownership interest through Teleglobe Media Enterprises in such ventures as LOOK which offers digital wireless broadcast distribution. The latter two investments are considered in development stage and have not yet (in 1999) generated profits, not much revenue.
Teleglobe recognizes that its challenge will be to contain
its costs.
Financial data:
Condensed financial statements without notes are presented for selected years in following tables:
Normalized statements and selected ratios based on above financial statements are presented in
Information sources:
Visit company web site at http://www.teleglobe.ca
SEC 10-K file available at http://www.sec.gov/cgi-bin/srch-edgar or http://www.edgar-online.com/
Teleglobe stock is traded on Montreal, Toronto and NYSE exchanges under the symbol TGO. Find stock quotes and recent news from http://finance.yahoo.com/ or http://www.quote.com/ or from the exchanges.