Ron Styles, SaskTel's President and CEO, is photographed in Toronto, Ont. Feb. 23/2012.Kevin Van Paassen/The Globe and Mail
Saskatchewan Telecommunications Holding Corp. admits it could face serious challenges if BCE Inc.'s $3.1-billion deal to acquire Manitoba Telecom Services Inc. goes through, including the risk of a renewed push by government to encourage more competition in the wireless industry.
The Saskatchewan Crown corporation published a report Monday in which it contemplated a future as one of only a few remaining regional telecom providers if neighbouring MTS is consumed by BCE, Canada's largest communications company.
Under its original terms, the deal would reduce the number of wireless operators in Manitoba to three, down from four. Most parts of the country now have a fourth wireless carrier that competes with the three national providers (BCE, Telus Corp. and Rogers Communications Inc.), whether existing regional telecom players such as Videotron Ltd. and Eastlink or startup carriers like Freedom Mobile, which was previously known as Wind Mobile and acquired by Shaw Communications Inc. earlier this year.
The SaskTel report notes that the loss of a four-player market could spur increased regulatory efforts to support competition in the industry, calling this the "most fundamental risk" of the MTS deal.
Such efforts could include lower costs for new wireless players to purchase spectrum – the airwaves used to build cellular networks – and "could reduce costs for competitors and increase costs or restrict capacity expansion for SaskTel."
"SaskTel and the Saskatchewan provincial government will need to aggressively lobby in Ottawa to ensure that our positions and the important role that SaskTel plays as a competitor in Saskatchewan are both heard and understood," the report reads, suggesting that the federal government's policy on telecom is not clear at this point.
The company wrote the report as a formal response to an independent "risk assessment" completed in June by Mark H. Goldberg & Associates Inc.,which examined the implications of the MTS deal for SaskTel.
The MTS deal could also lead to other risks, the report says, such as BCE winning more of the market for enterprise telecom services in the area after establishing a Western Canada headquarters in Winnipeg.
Nonetheless, the report says that SaskTel has "remained competitive in the face of many industry changes for well over two decades," and will have to keep investing in the company to remain competitive going forward.
"The BCE/MTS deal does not change this fundamental situation," the report says, adding, "SaskTel has competitive mitigation strategies in place to address these risks."
After BCE and MTS announced their plans to merge in May, Saskatchewan Premier Brad Wall fuelled speculation that the province could also sell SaskTel. In August he suggested that an offer for the Crown corporation would have to be rich enough to wipe out Saskatchewan's operating debt, which is about $4.1-billion, and include provisions aimed at keeping jobs in Regina. He also said the province would hold a public vote on any deal for the company.
Analysts say BCE or Telus Corp. could be potential buyers for SaskTel, but don't expect a deal to materialize in the near term.
MTS shareholders have voted to approve the sale to BCE and it has received court approval, but it still requires approvals from the CRTC, the Competition Bureau and the federal ministry of Innovation, Science and Economic Development.
The deal includes the sale of some MTS wireless customers and retail outlets to Telus, but further divestments of spectrum and customers to a player such as Shaw – which could act as a fourth carrier in the province – could be necessary to win government approvals.