George Cope, president and CEO of BCE Inc., addresses the company's annual meeting Thursday, April 28, 2016, in Montreal. BCE Inc. has a friendly deal to buy Manitoba Telecom Services Inc. in a deal they value at $3.9 billion.Paul Chiasson/The Canadian Press
In the past year, Canada's already cozy telecom industry has become a lot smaller, with the largest players gobbling up several of their tinier, more regional peers. At the centre of this latest wave of consolidation has been the lucrative wireless space.
Last June, cable behemoth Rogers Communications Inc. agreed to buy struggling cellphone service provider Mobilicity, which had spent months languishing in court-supervised creditor protection. In mid-December, discount mobile carrier Wind Mobile Corp. sold itself to Calgary's Shaw Communications Inc., which paid for Wind by selling its media holdings to related party Corus Entertainment Inc. on Jan. 13. Two days later, Manitoba Telecom Services Inc. closed its deal to sell its Allstream unit to U.S. fibre-optic network operator Zayo Group Holdings Inc.
The latter deal paved the way for the Winnipeg-based telco to be the next target. On Monday, MTS was taken off the market.
BCE Inc., the country's largest telecom player, has agreed to purchase what is left of MTS for $3.1-billion plus the assumption of $800-million in debt.
The marriage between BCE and MTS is not only about the new subscribers that BCE is inheriting. These customers currently pay much less for services than the average Bell user.
Like many of the wireless transactions before it, this deal will significantly and immediately boost BCE's physical presence. Bell said it will increase its IPTV footprint by 350,000 homes. And with MTS's infrastructure already in place, Bell can now easily offer its other services through those pipes.
It doesn't have to hire any construction crews, dig any holes, line any hydro poles or lay down any pricey fibre cables. It will spend $1-billion over five years to upgrade the broadband equipment, but at least it won't be starting from scratch.
There aren't a lot of these kinds of transactions left in the Canadian telecom industry that will be a slam dunk in Ottawa. Analysts are bombarded with questions about when Rogers is going to finally swallow Shaw, and some people still think Bell and Telus will one day become "Belus." But no one thinks that our politicians or regulators have a stomach for these kinds of megadeals.
To pass regulatory muster, these deal makers will have to continue their creative streak and be willing to give a little to get a lot. In this case, BCE is divesting one-third of MTS's wireless subscribers and dealer locations to its rival Telus Corp.
Strapped for cash or lacking focus, some companies might even consider selling smaller, non-core parts of their business. Larger providers seeking to boost growth may knock on the doors of Eastlink or Crown corporation Saskatchewan Telecommunications Holding Corp.
Still, with the current cast of companies and a government that keeps an ever-closer eye on competition, there will be few M&A surprises to come in Canadian telecom.
The market is waiting for Quebecor Inc. to address the 19-per-cent stake in Quebecor Media held by pension-fund giant Caisse de dépôt et placement du Québec. Quebecor has until 2019 to repurchase the balance of the Caisse's interest, or spin off Quebecor Media through an initial public offering, or sell the shares to another large investor. Quebecor also has unused spectrum licences outside of Quebec that it can sell to the highest bidder.
Cogeco Cable Inc. said it expects to bolster its U.S. cable footprint by pursuing tuck-in acquisitions.
The market knows these carriers will try to buy more wireless spectrum licences from their peers and in any auctions.
Most of the big players said they would focus in 2016 on paying down their debt and fortifying their networks.
At some point soon, when there are no more sources of growth left to buy in Canada, they will just have to make do with what they have.