Is Entwistle telling the truth?

On a recent conference call with analysts, Telus CEO Darren Entwistle reiterated the position his company's interest in Allstream Inc. is not “on the radar screen”. With Allstream's shareholders scheduled to vote this week on the company's acquisition by Manitoba Telecom Services, Entwistle's comments seem to rule out the possibility Telus will make a last-minute, bid for Allstream. Telus' reluctance to get involved makes sense because its balance sheet is just beginning to look healthy again after shedding nearly $3 billion of debt. Telus also has several strategic challenges such as reaching a new collective agreement with its unionized employees, improving operations in Ontario and Quebec, and addressing the looming threat of Internet telephony. Then again, Allstream does look impressive with its roster of large corporate customers and $3-billion of tax-loss carry forwards. One school of thought is Entwistle is content to let the Allstream-MTS marriage be consummated. Then, when the honeymoon is over, he will seek approval from the Telus board to make a move MTS. This is a gamble because MTS shares could climb if the Allstream starts to generate good results. The last time Entwistle bet on the price of stock going down was after Allstream came out bankruptcy protection. He – along with pretty much everyone else – had to be surprised when Allstream shares went from $30 to more than $70 – eliminating Telus' hope to pick up Allstream at a bargain-basement price.