Sunday, May 22, 2016

Sale of Manitoba's MTS to Bell could reduce wireless competition in Canada

Bell Canada (BCE) has agreed to buy Manitoba Telecom Services (MTS) in a friendly takeover valued at $3.9 billion. BCE is already the largest telecom company in Canada.

The purchase price breaks down into $3.1 billion for the company and $800 million of debt. In a separate transaction BCE will sell a third of the MTS postpaid subscribers and also retail locations to Telus.
MTS is now the largest wireless provider in Manitoba with 491,017 subscribers at the end of its last fiscal year. When the deal goes through BCE will have 400,000 subscribers and Telus 140,000. The deal will need the approval of Canadian Radio-Television and Telecommunications Burea, the Competition Bureau, and Industry Canada. It is expected to be finalized by later this year or early 2017.
Manitoba and Saskatchewan have among the cheapest cellular plans in Canada, thanks to Sasktel in Saskatchewan and MTS in Manitoba. Some experts think that the merger will result in less competition and higher fees. Sasktel is a crown corporation which the new Saskatchewan Party government could possibly put it up for sale, but may be wary of the negative political reaction if it did so. MTS was sold to private shareholders by the Conservative government of Gary Filmon in 1996. With the sale of MTS to BCE, some experts expect consumers may have to pay more for their services.
An article in the Globe and Mail by Dwayne Winseck, a professor in the School of Journalism and Communication at Carleton University, and Ben Klass, a PhD candidate at the same university, claims the deal could have negative consequences.The article notes:A transaction of this magnitude deserves careful consideration. Some pundits and think tanks have been quick to support the deal, but a more rational review of the situation is needed. Our research suggests that the takeover would not be in the best interest of Manitobans, and that it could set a harmful precedent for the rest of the country.
Winseck points out that MTS acts as an independent competitor to the national carriers. Manitobans are able to obtain some of the lowest price wireless services in Canada. In provinces such as B.C, Alberta, and Ontario, where there are no strong competitors for Bell, Rogers and Telus, rates per month for popular voice and data plans are $30 to $70 higher. The plans also include meager monthly data caps that MTS does not have.
The supports claim that "ruinous competition" has left MTS in dire financial straits. Supporters argue that BCE will help bring Manitoba into the future. BCE promises to invest $1 billion over five years to build more modern infrastructure. However, Wensock claims their data show MTS is more profitable and invests relatively more money in its networks than BCE. The services offered by MTS already compare favorably with what BCE has to offer in other provinces.
Wensock points out that with the buy out, the number of wireless carriers in Manitoba will be reduced from four to three. The US blocked a merger that would have had this result as did European regulators. For almost a decade the Canadian government has been attempting to increase competition in the wireless area. She notes that supporters play down the importance of independent competition and play also the negative effects of having less competition.
As of now, MTS is the only operator to offer unlimited data plans both for mobile and home broadband. These plans will likely disappear. Telecom consultancy company Rewheel has found that wireless markets that go from four to three carriers usually see a steep rise in prices along with restrictive data caps. Both the CRTC and the Competition Bureau has found the mobile wireless industry is not sufficiently competitive. The three firms BCE, Rogers, and Telus are found by the two bodies to have "market power". The merger would give BCE and the rest even more. Wensock recommends that regulators say no to the BCE buyout of MTS.

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