Striking a $40-a-share deal to acquire Manitoba Telecom Services Inc. was the easy part. Now, BCE Inc. is turning to the task of selling the country on it.
The two companies announced the $3.1-billion transaction (valued at $3.9-billion, including the assumption of debt) almost three weeks ago, sparking a stream of public debate over the merits of BCE boosting investment in Manitoba on the one hand versus the demise of wireless competition in the province and threat of higher prices on the other.
The federal Competition Bureau is also seeking public input on the deal and Manitoba's Prairie neighbour Saskatchewan has asked for an independent risk analysis on what the deal could mean for SaskTel, that province's government-owned telephone company.
As Montreal-based BCE navigates the regulatory approval process – in addition to the competition watchdog, it must get the green light from Innovation, Science and Economic Development Canada and the Canadian Radio-television and Telecommunications Commission – it has now enlisted the support of the Manitoba government to bolster its case for the deal.
BCE and MTS executives held a news conference on Friday with the province's new Conservative Premier, Brian Pallister, gathering in Morris, a small town about 70 kilometres south of Winnipeg along Highway 75. It was a symbolic location, as BCE said it plans to ensure continuous wireless data coverage along the highway, which is a key transportation artery linking Winnipeg to the United States.
"Building better communications networks is what Bell does best," said Wade Oosterman, group president of BCE, explaining that his company will address gaps in cellular coverage along the route. BCE spokesman Jason Laszlo said MTS is "beginning the work now to secure tower sites and permits," adding the project will be fully completed after the Bell-MTS transaction closes at the end of this year or early 2017.
Mr. Pallister said in a statement that he "applauds today's commitment to improved telecommunications services."
BCE previously said it will make Winnipeg the site of its Western Canada headquarters and will spend $1-billion over five years on capital investments in the province. That will include the wireless upgrades, BCE said Friday, as well as bringing faster Internet service and the company's popular IPTV product Fibe TV to Manitoba and integrating MTS's Winnipeg data centre into BCE's own enterprise services business.
Manitoba doesn't need to sign off on the deal, but the province is a key customer of MTS and the companies clearly view the government's public goodwill toward the transaction as a plus.
Macquarie Capital Markets analyst Greg MacDonald says anything BCE can do to show it will put money into networks could help its case, particularly in light of recent international examples that have gone against market consolidation in the wireless industry. "If you look at the regulatory trends around the world, governments are pushing back on consolidation when it results in four wireless players going down to three," he said. "You've seen it in the U.S. with the T-Mobile deal, when [purchaser] AT&T was denied, and you've seen it recently in the U.K. [where regulators halted a proposed transaction earlier this month]."
As the wireless industry matures and revenue growth begins to slow, Mr. MacDonald said operators will look to cut capital investments and BCE will want to show that the MTS deal would help spur continued growth and allow it to keep spending money to improve services.
BCE has struck a deal to sell one-third of MTS's wireless customers to Telus Corp. to facilitate a more equal breakdown of the market share between BCE, Telus and Rogers Communications Inc. But most observers think that alone won't be enough and that some concessions will be demanded to allow a fourth operator such as Shaw Communications Inc., which owns wireless carrier Wind Mobile, to enter the Manitoba market. "My view is the government will very likely want to make sure that spectrum is mandated to be sold to Shaw and further customers are mandated to be sold to Shaw as a way of being able to say: 'We're maintaining a four-player market and that's as good as we can do,'" Mr. MacDonald said. "The reality is prices may go up anyway, but the government can't control the prices."
Manitoba and Saskatchewan currently enjoy wireless prices that are significantly cheaper than in Ontario, British Columbia and Alberta, where there are only three strong players with quality networks. Consumer advocates have warned those prices will disappear if the MTS deal closes and the Big Three carriers don't have to face a competitor in Manitoba.
Rogers recently raised some of its wireless prices in the province by $5 a month, Canaccord Genuity's Sanford Lee wrote in a report Thursday, noting that "price hikes would not appear to help the BCE/MTS deal and could raise the eyebrows of regulators."
"If the other carriers decide to match, on the surface, it would not lend support for regulatory approval," he said, adding that MTS has seen its wireless margins decline in recent years "partly as a result of aggressively low prices" and suggesting those prices may not be sustainable.
Desjardins Securities analyst Maher Yaghi said on Friday that if Saskatchewan's move to evaluate the prospects of SaskTel leads to a decision to privatize the Crown corporation, BCE or Telus could be possible bidders. "It is plausible that Shaw could pitch to the government that it is better placed to buy one-third of MTS's wireless subs and potentially also be a partner to whoever buys SaskTel in the future to offload wireless subscribers," he said. "In this scenario, Shaw would end up with a contiguous wireless market stretching from B.C. to Ontario."
Pay hikes core of new contract for hundreds of unionized SaskTel workers
Hundreds of unionized workers at SaskTel have voted in favour of a new three-year contract with their employer.
Members of three Unifor locals ratified the deal in voting that ended on Wednesday.
SaskTel says in a release that the package, which covers more than 3,000 workers in a variety of departments, calls for hourly pay to increase by 1.75 per cent retroactive to March 13, 2016.
Another increase of 1.65 per cent will kick in next March, with a 1.2-per-cent hike to follow in the final year of the agreement.
Unifor says in a statement there are also pension-plan improvements, along with stronger language covering job security and conflict and grievance resolution.
The union's bargaining committee had recommended members support the deal.