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Telecom regulation anyone's guess With a one-two punch, regulation of the telecommunications sector is now a mess, complicated even further by the possibility of a federal election.
Last week, the federal government decided to block a decision on Internet pricing by its telecom regulator, the Canadian Radio-television and Telecommunications Commission. It marked the second time Ottawa moved against the CRTC, the first being to overturn a decision declaring that the ownership structure of Globalive, which runs Wind Mobile, did not meet Canadian rules.
Then, in a bizarre twist, the Federal Court said the Tories overstepped their authority. They must now decided whether to appeal, a route they are expected to take.
For now, the regulatory regime in a key area of Canadian business is in disarray, threatening a period of paralysis or second guessing.
"This further increases the regulatory uncertainty and volatility of the sector, adding to that related to usage based billing," said Scotia Capital analysts Jeff Fan and Anubhav Mehla.
Analysts have also begun to calculate the winners and losers, and the potential impact on government policy.
UBS Securities Canada analyst Phillip Huang, noting today that Wind now has more than 250,000 subscribers, believes the court ruling will, ultimately, help Ottawa's bid to overhaul ownership rules in the sector.
"We are not political experts, but we find it difficult to imagine that any political party would risks being blamed for putting over a quarter million Canadians out of their wireless services, many of whom only just committed to Wind over the holidays," he said.
"We believe this development may force opposition parties to support the government's effort to change Canadian telecom foreign ownership rules."
The Scotia Capital analysts, though, cautioned "placing too much reliance on foreign ownership rule changes, given a potential spring federal election in the next few months."
As to who wins and who loses, analysts are speculating that Wind could be forced to merge with one of its rivals if, with Ottawa, it can't turn the tables on the 2009 ownership decision.
Analyst Maher Yaghi of Desjardins expects the government to appeal Friday's court ruling, but "should the appeal fail or should the government be unable to rewrite its decision, a merger of Wind with other new entrants is the most rational longer-term outcome."
Mr. Yaghi said he believed two of the three new entrants - Wind, Mobilicity and Public - should merge regardless, just to stay competitive, given the dominance of the three major players, the Bell unit of BCE Inc. , Rogers Communications Inc. and Telus Corp.
"While a merger was not a short-term priority for Wind, a delay in the change of the Telecommunications Act or a loss on appeal could have a disastrous effect; hence, Friday's decision could increase the possibility of a merger occurring sooner in order to avert a potentially very negative outcome for Globalive."
Who could benefit?
Mr. Yaghi believes Mobilicity would be the biggest beneficiary, given that its pricing and areas of operation are similar.
"As the largest wireless company in Canada, Rogers has arguably felt the most negative impact from new entrants, particularly Wind," he added. "Therefore, Rogers stands to gain the most among the big three telcos should Wind become less competititve or if its operations are handicapped. Further, Rogers, as well as BCE and Telus, stand to benefit from the strain on Wind's capital resources should lengthy legal battles ensue as a result of Friday's decision."
Scotia Capital analysts Jeff Fan and Nubhav Mehla agreed the ruling could be positive for the major incumbent players in the short term, by sparking consolidation among the new entrants, it won't change the challenges over the longer term.
- Wind Mobile ruling puts Ottawa on the hot seat over foreign ownership rules
- Why not a metered Internet?
Can Europe get its act together? Europe's odd couple - Germany's Angela Merkel and France's Nicolas Sarkozy - are proposing measures that appear to be widening divisions, rather than signalling any co-ordinated action to deal with the euro zone's debt crisis.
At a summit on Friday, the two leaders called for a "competitiveness pact" that the German chancellor wants countries to agree to at a March meeting before she agrees to boost the continent's bailout fund, known as the European Financial Stability Facility or EFSF. Several countries have opposed certain aspects of the proposal government taxes, wages and pensions in the euro zone.
"Maybe we are just to 'Anglo' to understand this, but we cannot fathom how this 'competitiveness pact' is going to help Greece - with its whopping debt service burden running out to 2019 - return to the market to borrow money and/or meet its financial obligations," said Carl Weinberg, chief economst at High Frequency Economics, adding it looks like Greece must restructure its debt and that its problem is immediate.
Similarly, he added, he doesn't get why such a pact would make investors more confident that Portugal, Spain or Belgium can pay their debts. Or how it could guarantee that the next government in Ireland, which is heading into an election, will accept IMF terms on its bailout.
"With no aspect of the crisis addressed by euroland's leaders on Friday, we expect a reversal of last week's hopes for progress."
Economist Ben May of Capital Economics agreed little came from the meeting.
"Friday's European Council meeting left us little the wiser over the likely changes to the size and scope of the European Financial Stability Facility (EFSF) that will be announced in March and raised doubts over whether policy makers in the region will even be able to agree on substantive reforms," he said.
AOL to buy Huffington Post The chief executive officer of AOL Inc. took another strategic step forward today with a $315-million (U.S.) deal to acquire The Huffington Post.
AOL will get its hands on one of the most popular news sites, and its founder Arianna Huffington, in the deal.
CEO Tim Armstrong has been attempting to remake AOL, with a focus on news delivery. Today's deal, The Financial Times noted, is the biggest step by AOL yet to become a force in free, ad-based content.
Is Japan emerging from slow period? The governor of the Bank of Japan believes his country is coming out of a slow period, though must renew efforts to boost the economy.
"As for the future, everything depends on the course of the economy," Masaaki Shirakawa told reporters in Tokyo, according to Reuters. "The economy is now exiting from a temporary pause. We are now observing tood signs."
Why has B.C.'s jobless rate topped Ontario's? British Columbia's unemployment rate has topped Ontario's for the first time since 2005, leading one economist to try to find out why.
The answer, Robert Kavcic of BMO Nesbitt Burns believes, lies in strong public sector hiring in Ontario.
British Columbia's jobless rate jumped in January to 8.2 per cent from 7.6 per cent, Statistics Canada reported last week, while Ontario's held steady at 8.1 per cent.
"Both provinces implemented the HST at the same time, so aside from uncertainty over its future in B.C., there's probably not much to differentiate the two on that front," Mr. Kavcic says.
"January's 13,000 drop in manufacturing jobs in B.C. is curious, and comes one month after a similarly curious 45,000 jump in Ontario," he adds. "But perhaps most striking is the ongoing public-sector hiring spree in Ontario, where employment is up 5.5 per cent year over year, third only to PEI and Newfoundland - one wonders how long this can last with fiscal restraint looming on the horizon."
In a report last week, CIBC World Markets forecast that economic growth in British Columbia would outpace that in Ontario both this year and next, and that jobless levels in the western province would run well below those of its central Canadian counterpart.
Boyd Erman's Morning Meeting A Bloomberg News story analyzing Sara Lee Corp.'s mergers and acquisitions track record makes a compelling case for the food company to win some sort of award for worst use of deal making in pursuit of shareholder value, Streetwise columnist Boyd Erman reports today.
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