The telecom industry was startled last week when the government's Speech from the Throne dropped a bombshell: It would eliminate restrictions on foreign ownership in the regulated sector.
But the reality may be much less dramatic.
A day after the Throne Speech, the federal budget made reference only to removing foreign ownership restrictions on Canadian satellite companies, but not to the much broader telecom sector as a whole.
The budget's failure to reinforce what was said in the Throne Speech led to widespread confusion in the industry, as big telecom companies, analysts and investment bankers tried to ascertain the government's actual intentions.
"What the government appears to have done is over-promised and under-delivered and that, I think, is the disappointment," a regulatory source in Ottawa said. "They created such an expectation. And then when people got the budget, they said, 'This is all there is?' I would have expected more precision in something as significant as this."
What was expected to result in a flurry of mergers and acquisitions is more likely to slowly evolve over what could be years of study and review. Canada is, in fact, more likely to see regulatory reform in line with recommendations from blue-ribbon panels that date back at least four years.
"We will remove the existing restrictions on foreign ownership of Canadian satellites as a first priority," wrote Industry Minister Tony Clement's press secretary, Lynn Meahan, in an e-mail to The Globe and Mail.
"Our government will also be investigating the existing restrictions for the telecommunications industry. This is a complex issue involving changes to business models, rapidly evolving technology, and existing legislation, such as the 1993 Telecommunications Act."
Ms. Meahan said the government will offer clarity on timing "in the coming weeks."
The excitement of Wednesday evening now seems so distant. After that day's Throne Speech, Bay Street was on pins and needles, Ottawa's staid regulatory community was stunned, and Canada's big telecom companies were shaking and cautious. The federal government appeared to be striking down barriers to foreign investment in Canada's "satellite and telecommunications industries."
Bay Street was abuzz with whispers of consolidation - perhaps even a renewed attempt to create "Belus," a merger of BCE Inc.'s Bell Canada and Telus Corp. Analysts were frantically recasting their forecasts.
Bell, Telus and Rogers Communications Inc., meanwhile, were cautious and cagey, with experts weighing in on the implications of new competition suddenly having access to very deep, foreign pockets - and whether they themselves could be bought out by a gigantic foreign telecom player.
But when the actual budget emerged on Thursday, there was stunned silence. And by Thursday evening there was abject confusion. The budget only made reference to "satellites," an obscure part of the broader telecom industry that hasn't been the subject of foreign interest in years.
The budget makes specific, and likely deliberate, reference to a 2008 report by the Competition Policy Review Panel, which recommended a very gradual loosening of foreign ownership rules.
Specifically, the panel said a preliminary five-year phase would only affect companies with a market share of less than 10 per cent, allowing new entrants to get cheap equity to spur competition. Only after that initial phase would foreign ownership rules be relaxed more broadly.
Liberal industry critic Marc Garneau said he thinks the Harper government still intends to move forward with liberalizing foreign ownership rules, despite the ambiguity contained in the budget.
"I can understand the Street's speculating, because suddenly something's dangled in front of them and then there appears to be silence," Mr. Garneau said. "This is not good, in the sense that it would be much better if there was clear direction being given in the budget document. But I think it's indicative of the fact that the Conservative government hasn't quite figured out how to go about it."
