HOW BCE’S COPE CUT THE CORD AT BELL
CEO sees stark shift to broadband pay off for century-old telco
It’s next to impossible TORONTO to avoid sports metaphors when looking back at George Cope’s 10year tenure at the top of BCE Inc., let alone his three decades in the telecom space.
For one thing, his backstory centres on his basketball days at high school, where he said he got his laser-like focus on results. He even works with a couple of guys he knows from the courts of Port Perry, Ont. — Bell president Wade Oosterman and board member Bob Simmonds, whose brother played on Cope’s team.
Though the 56-year-old now leads the charge from the corner office on the 44th floor of a downtown Toronto tower, teamwork is just one of the sports metaphors he often speaks in.
“In the truest sense of the word, you keep score in business. I like that part of it,” he said, reflecting on his 10-year anniversary. “You can actually grade how you’re doing.”
It helps that Cope has racked up a pretty impressive list of stats during the past decade: Profit at Canada’s largest telecommunications company has tripled to $3.05 billion, its dividend doubled to 75.5 cents and the stock price rose 37 per cent since he took centre court on July 11, 2008. Where Bell used to trail its rivals in terms of subscriber counts, it now has the secondmost wireless customers and the most internet and television customers.
More important, the sixfoot-seven teen basketball star turned wireless pioneer, has overseen Bell’s transition as its century-old landline business ceded to broadband. The local phone business went from being responsible for “literally all” the company’s revenue to just seven per cent this year, Cope said.
“That has been the migration challenge for telcos, really,” he said in an interview after being inducted into the Canadian Business Hall of Fame last month. “Managing that transition in a way that allowed us still to generate free cash flow to build the wireless network or put the capital into broadband.”
That shift required Bell to invest billions into its networks. Under Cope, it has embarked on an expensive plan to extend ultra-fast fibre connections directly to homes, a move he believes will prepare its wired and wireless businesses for the next 10 years as consumers demand more data and 5G networks power real-time applications such as automated cars.
Cope, who said he’s “having fun” when asked if he expects he’ll still be CEO in another 10 years, has been a boss for almost his entire career, dating back to his mid-20s. And he’s always been a wireless guy.
After getting a business degree from Western University in London, Ont., he worked a short stint at a bank before his on-court relationship with the Simmonds family led him to join Brooktel Communications Inc. in 1985 when it was a wireless supplier to Bell. Bell eventually bought that company, clearing the way in 1987 for Cope and co. to focus on Clearnet Communications Inc., also run by the Simmonds family.
“We thought there would be room for more than two wireless companies in Canada,” Cope said. That seems like a nobrainer today, but it was a risky view at a time when he pegged wireless penetration at around 10 per cent. “People weren’t sure … would it really be a mass consumer business, or would it stay a business phone for people who were wealthy?”
He ran Clearnet from the outset, through its public offering in the 1990s, until Telus Corp. bought it for $6.6 billion in 2000. Then he ran the Telus Mobility division under Darren Entwistle, who’s the same age as Cope and still chief executive at Telus. After leaving Telus with a oneyear non-compete agreement, Cope in 2005 was tapped to join Bell as president and chief operating officer. He was promoted to CEO in 2008 as the chosen one to take the company private.
But that $52-billion transaction, led by the Ontario Teachers’ Pension Plan, fell through during the financial crisis. Investors worried about how Bell, perceived as a bloated bureaucracy, would make a comeback in the troubled landline industry as people were cutting the cord.
People familiar with the 138-year-old telephone company emphasize how drastic the transition was under Cope’s leadership. His 100-day turnaround plan included laying off 15 per cent of management, some 2,500 people at the heavily layered company.
At the end of 2008, the company had 50,102 employees. That number remains relatively stable despite numerous acquisitions over the years. Bell ended 2017 with 51,679, including about 3,600 from its acquisition of Manitoba Telecom Services Inc.
“The change that occurred was dramatic,” said Thomas O’Neill, who sat on BCE’s board from 2003 to 2016 and was named chair in 2009. “He outperformed what the private people thought the company was capable of doing when they made the bid to buy it.”
O’Neill said Cope’s “relentless” focus on his priorities permeated the entire company, with assistants and executives alike being able to cite the goals, such as investing in broadband, improving customer service and achieving a competitive cost structure.
He also lauded Cope’s courage in focusing Bell’s charitable efforts on mental health. It took the board a while to come around to the idea, given the stigma surrounding mental health and worries about what it could do for the brand, he said, but Cope convinced the board to approve millions for the #BellLetsTalk campaign.
Bell’s relationship with the federal government has had some bumps under Cope’s leadership. There was a public tiff in 2012 with the Canadian Radio-television and Telecommunications Commission’s former chair JeanPierre Blais over a $3.4-billion deal to buy Astral Media Inc., a battle the CRTC ultimately won by requiring Bell to divest a number of channels to gain approval for a deal it thought would be a shoo-in.
But these days, Cope said the relationship is on a positive foot. Despite criticism that the CRTC’s new leadership team is too cozy with Bell, he said it’s important for industry to have a dialogue given the billions it invests annually.
“We have to have some idea of what the rules are going to be or else you can’t make the investment,” he said. “Shareholders just want predictability and stability on the regulatory front. We think we have that now.”
Shareholders have also seen more stability among Bell’s customers. Bell’s customer service has improved under Cope’s watch, with a falling rate of customers axing service in any given period.
But as the largest telecom, Bell still receives the highest volume of customer complaints. And a recent CBC investigation — in which former employees described a high-pressure environment with misleading sales tactics — prompted the federal government to demand the CRTC hold an inquiry into the entire industry’s sales practices.
The government has also zeroed in on consumer affordability, particularly when it comes to wireless and broadband. Industry players across the board dispute government assertions that Canadians pay some of the highest rates in the world for mobile data and argue their networks are better. Cope said the ultimate test is the industry’s overall return on capital, which is between eight and 12 per cent.
“We’re certainly not making extraordinary returns,” he said, pointing out there are no longer articles on Bell being overstaffed.
Cope recognizes that families are sensitive to wireless pricing, especially since it is an expense that didn’t exist 15 years ago, but pointed out that low-cost brands such as its own Lucky Mobile are options, and noted that prices have not gone up in Manitoba even though Bell’s acquisition of MTS reduced the number of competitors to three. Indeed, data deals there are better than ever.
Asked if he’s concerned about newer players such as Shaw Communications Inc.’s Freedom Mobile and Quebecor Inc.’s Vidéotron making a dent, he said he’s paid to worry: “I worry about everything.” But he added the industry is rapidly growing thanks to immigration, a strong economy and people adding second mobile phones.
Bell, of course, also has competition in other areas of its business. Cope beefed up its media division with the Astral purchase, oversaw the launch of an internet-protocol TV product and bought 37.5 per cent of Maple Leaf Sports & Entertainment Ltd. to get sports content since the latter owns the Toronto Maple Leafs and Raptors, as well as other properties.
But television subscription and advertising revenue are stagnating as consumers watch more content over the internet, a platform dominated by giants such as Netflix Inc., which plans to spend US$8 billion on content this year alone.
Bell’s streaming service CraveTV competes with Netflix, but Cope said the more people who use the internet, the better the story.
“It all just drives this continued explosion of use of broadband, which is really the core, core business of Bell, whether its wireless or wireline,” he said.
High demand for video content fuels a big chunk of internet traffic, with Netflix accounting for about 20 per cent of usage, Cope said. But he wants to make sure people are paying for that content. Bell, which must invest a percentage of its TV subscription revenue into content creation, is part of a coalition that in May asked the CRTC to crack down on piracy websites.
“Everybody would love a free automobile, but we’re not going to have free automobiles,” he said. “We can’t have all the content viewed with nobody paying for it or we’re not going to have a content industry.”
That content piracy irks Cope is no surprise given his persistent focus on maximizing return on investment.
David Wells, who worked with Cope at Clearnet and then at Bell until he retired in 2013, remembers Cope drilling “right down to the gory detail” of a billing system problem when they were at Clearnet.
Wells also praised Cope as a humble guy and a team player. At Clearnet, he said, Cope decided to put $10 from every cellphone sold into a pot to be split between every employee when the company hit one million subscribers. After Telus bought it out, everyone got about $5,000, he said.
The change that occurred was dramatic. He outperformed what the private people thought the company was capable of doing.