The MTS building in downtown Winnipeg is seen on Tuesday Nov. 29, 2005.Joe Bryksa/The Canadian Press
Telus Corp. considered a bid for Manitoba Telecom Services Inc. before the provincial player accepted a $3.1-billion offer from BCE Inc. in a deal that came together quickly, a detailed information circular reveals.
Published by MTS ahead of a shareholder vote scheduled for June 23, the report states that by early spring, Telus knew the company was willing to consider acquisition proposals. But after rival BCE moved quickly, approaching the Winnipeg-based company with an attractive price, commitments to the province and short timeline to close a deal, Telus decided not to make an offer of its own.
Instead, Telus approached BCE with its own offer to acquire certain assets from MTS and eventually struck a deal to buy one-third of MTS's Manitoba wireless subscribers (about 140,000 customers) and one-third of the company's dealer locations in the province.
"On April 25, [Telus CEO Darren] Entwistle notified [MTS CEO Jay] Forbes that Telus had determined it was not going to make an offer to acquire MTS," the circular says.
George Cope, chief executive officer of BCE, later informed Mr. Forbes that he had received an "unsolicited officer" from Telus and the two companies had reached an understanding on the subscriber sale.
Non-disclosure agreements were quickly signed. After a short period of due diligence, the companies announced both the sale transaction and the side deal with Telus on May 2.
With the rapid series of negotiations regarding the details of the transaction behind them, the companies still need two-thirds of MTS shareholders to vote to approve it on June 23 and must also win regulatory and government approval. Analysts suggest that approval may require concessions.
The circular also explains that while MTS was conducting a sales process last year for Allstream, its fibre-optic enterprise services division, both BCE and Telus "informally raised the possibility of exploring a potential acquisition of MTS."
"No serious discussions ensued" at the time as MTS was primarily focused on the Allstream sale – a $465-million deal that closed in January – and its own efforts to cut costs and improve performance at its Manitoba consumer telecom business.
However, due to those informal discussions as well as widespread speculation in the market that MTS itself would eventually be for sale, early this year the company decided to carefully evaluate its options and enlisted the help of an army of outside advisers including an international consulting firm, three banks, two law firms and a public relations firm.
One possibility was to pursue an acquisition of or merger with SaskTel, the Crown corporation telephone company in neighbouring Saskatchewan.
By March 17, MTS had determined that if it were to pursue a sale, it could generate the most value through a deal with one of the large Canadian telecom players, more than it could hope to win through a sale to a foreign telecom operator or to private equity investors.
The MTS board authorized meetings with senior officials at BCE, Telus and Rogers Communications Inc. to let Canada's three largest wireless companies know that while it was still focused on its transformation plans and wasn't initiating a formal sales process, it was prepared to respond "if an offer that was compelling for all of the company's stakeholders was received."
On April 21, Mr. Cope presented Mr. Forbes with just such an offer in Los Angeles, where the two met to avoid attracting attention in a Canadian city where they might be recognized.
A new public opinion poll commissioned by the Public Interest Advocacy Centre (PIAC) and published Tuesday revealed that many Manitobans are concerned that the deal could lead to higher prices for Internet and wireless services and the end to unlimited data plans.
Fifty-three per cent of MTS customers surveyed in the Environics Research telephone survey of 1,048 people said they thought Internet prices would increase while 54 per cent said wireless prices would rise.
MTS currently offers unlimited data plans for home Internet subscribers and 75 per cent of MTS customers felt such offers would end under BCE's ownership. Similarly, 74 per cent of subscribers said they expect BCE would no longer offer flat-rate unlimited data wireless plans.
Manitoba customers currently enjoy lower prices than those in most other provinces and are concerned about those lower prices disappearing, John Lawford, executive director of PIAC, said in an interview at the Canadian Telecom Summit in Toronto on Tuesday.
He said that if the deal is approved, the Competition Bureau should consider addressing those concerns in part by imposing conditions on BCE such as a requirement to maintain certain pricing plans and unlimited data options in the market for a certain period of time. There is some precedent for this as a similar step was taken in the approval of discount carrier Public Mobile's sale to Telus in 2013.
In a note to clients last week, Desjardins Securities analyst Maher Yaghi noted that the NDP opposition both in Manitoba and at the federal level have said they would not support the deal. He also pointed to an Angus Reid poll last week that said 61 per cent of Manitobans disapprove of the transaction.
But on the other hand, Mr. Yaghi noted, the Conservative government in Manitoba has publicly indicated it supports the deal and the federal government has yet to weigh in.
"While politics could influence the regulators' final decision, we note that a public outcry over the deal has not materialized yet. However, if stronger public opposition to the deal emerges, we believe there would be pressure on regulators to obtain concessions from BCE," Mr. Yaghi said.
"We still believe that the deal as proposed raises questions over future competition in Manitoba, but we expect BCE to offer additional sweeteners to make the acquisition more palatable to regulators."