The takeover soap opera that has become Bell Canada has become even more complex now that Telus, Canada’s second-largest carriers, has disclosed it’s interested in a merger with Bell, the country’s largest carrier.
So why does this deal make sense as opposed a leveraged buyout by private equity firms flush with billions of dollars that desperately needs a home? According to UBS, there are four major reasons:
1. Bell avoids privatization
2. No foreign ownership issues and apparently looked favorably upon by the federal government
3. Lots of synergies (a.k.a. operating costs can be slashed)
If a Telus-Bell deal does manage to materialize, the next question is what’s next for the Canadian telecom/cable landscape. Does Shaw go rushing into the arms of Rogers? Does Quebecor and Videotron Cogeco join forces. Does Bell Aliant buy Eastlink? If you’re an investment banker, it’s money time. If you’re a consumer, choice may be about to go extinct.
Does Quebecor and Videotron join forces.
They already did. Videotron is property of Quebecor.
Foreein ownership? What about Canadian jobs? It would be bad for competition, prices wouldn’t go down, and jobs would be leaving the country. Telus has been taking jobs away from Canadians for two years now…
http://itschironboy.blogspot.com/2007/06/telus-and-charm-offensive.html
There are a lot of combinations that could emerge, but most of those you list are unlikely.
Rogers-Cogeco-Shaw would be natural combination in response to the merger. It would have similar territory to “Bellus” and Rogers already owns about 20% of Cogeco. However, they all depend on controlling families wanting to sell out. Given that each of these is having no trouble competing against either Bell or Telus now, and a merger won’t make “Bellus” any more competitive (and would likely distract them for a year or two), there’s no pressure to deal.
Eastlink and Bell Aliant has no chance. A merger of the local cable and telco won’t ever be allowed and the Braggs have no reason to sell (for the same reason as the Shaws and the Audets).
Videotron has a unique position in Quebec and no one to buy. (They could pick up parts of Cogeco or Persona in Quebec, but nothing else would make sense.)
At the end of the day, Bell-Telus makes sense for one reason: combine the wireless businesses, save a bundle on the overlapping networks, and ride the “rational pricing” of a two-player market into the sunset. (Ironically, that will also give Rogers more cash, which it will likely use to take away larger and larger pieces of Bell’s wireline business in Ontario.)
Damn… this looks bad for the consumer… I’m not looking forward to consolidation.
Cheers,
Aidan
http://www.MappingTheWeb.com
Damn. Consumer telecommunications in Canada is embarrassing in the eyes of the global community. Not only are we behind in technology and services where we used to be a leader. Now we find ourselves with the prospect of less choice of service and service providers which could stifle our already over priced service agreements. Argh, what a way to start a friday. Thanks Mark Evans.