Bruce Telecom CEO ‘optimistic’ company can undo shrinking profits

Management, board agree to 3% pay cut to save costs

By Kristen Shane


Kincardine taxpayers may see one-third less money from Bruce Telecom this year than last year. The municipally-owned telecommunications company is asking to drop its yearly payout to the municipality from $1.2 million to $800,000.


The drop reflects a rocky 2009 for Bruce Telecom. But in his first month on the job, CEO Eric Dobson made a series of cost-saving changes he says he hopes will help the company better compete and, in the long run, make more money.


Dobson, chief financial officer Laurel Stein and several Bruce Telecom board members updated Kincardine council last week on the company’s 2009 year-end results and 2010 budget.


In 2008, the company’s year-end net income was almost $1.9 million. In 2009, it’s fallen short by more than half of that, to $723,000. That’s worse than company heads had predicted the business would fall when they last updated council in autumn. An auditor still has to review the company’s financial statements to confirm that amount.


Reflected in the slump is $490,000 worth of write-downs the company is taking because it has too much television-related inventory collecting dust and losing value.


“It’s not all doom and gloom,” said Stein.


The company’s local and long-distance telephone revenues last year were good, she said.


Luck was on Bruce Telecom’s side when Canada’s telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), decided in December to extend its expiring regulatory framework until further notice in order to further review a few outstanding issues.


“What that means for us is some of the things we were looking at losing in 2010, we will not lose,” said Stein. But 2011 is still a big question mark.


The CRTC has also yet to rule on a proposal by Bell to double the price it charges to Bruce Telecom to lease part of its network in the Owen Sound and Southampton areas. On the down side, Stein said, if the CRTC sides with Bell, “They can go back to mid December of 2009 and essentially backdate those rates. So there’s a big unknown. We’ve factored an assumption related to that into our plan for 2010, so that we’ve got some coverage should they decide to do that,” she said.


Bruce Telecom CEO Eric Dobson explains the company’s financial state to Kincardine council last week. (Kristen Shane photo)


Dobson started at the helm of a floundering ship Jan. 4, but said he had been well primed on the company’s problems. To turn things around, he cut two management jobs and created a new administrative position to save the company $65,000. He asked employees to forgo a three and a half per cent pay raise that their contract allows, and take a three per cent cut instead. He likely won’t know until next week whether the 70 staff, represented by two unions, will accept the offer.


The board of directors agreed to take a three per cent cut.


And Dobson didn’t leave out himself. He and the rest of management also agreed to a three per cent cut.

“It was the right thing to do,” he said after the meeting. “We knew as a management team that we’re not willing to go to employees to ask them to take a pay cut if we’re not willing to do the same ourselves.”


If the employees don’t agree, the company will have to find the savings anyhow because management has already factored the three per cent across-the-board wage cut into its 2010 budget, to make it $350,000 lighter.


“This isn’t just an exercise in cost-cutting, cost-cutting, cost-cutting,” said Dobson. “This is cost-cutting so we can invest and we can begin to grow the business again.”


That will come slowly. The company is planning a bare-bones capital budget, only enough to maintain its current network without much expansion. The most expensive project on the books is $565,000 to dig out cables, move their location and replace them with new fibre-optic cables during the planned reconstruction of Highway 21.


The money it saves now, Dobson says, the company will reinvest into a better network and more bandwidth in the future, so it can compete with other companies, attract more customers and make more money.


If the cost-saving does the trick and the company doesn’t get burned by upcoming CRTC decisions, Stein estimated Bruce Telecom should see a healthy $1.2 million net income in 2010 to boost next year’s municipal payout to $910,000.


Council members had been warned that the company’s sinking 2009 profits would mean a smaller dividend paid to the municipality.


“It’s going to make this year’s budget more difficult, no doubt about it,” said Mayor Larry Kraemer, after the meeting. “But it’s already been forecasted in the (pre-budget) discussions that we’ve had. It’s around where we expected it to be.”


Council members seemed generally pleased with how management was handling the slumping revenue.


“I think, for one month in, you’ve certainly had a hell of a productive month,” Kraemer told Dobson.


“I want to congratulate you on what you’re doing. I think that it’s great to see that you’re taking a cut, and you’re trying to make ends meet,” said councillor Gordon Campbell.


“It won’t be easy. It will take a lot of work and a lot of co-operation from employees, and the board and council,” said Dobson. “I’m optimistic. I know this is something that can be successful.”