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Telus has a history of rewarding shareholders with dividend growth, according to Yield Hog panelist Tony Demarin of BCV Asset Management.SHAUN BEST

Telus Corp. has flipped the switch on its new satellite television service in Western Canada, blanketing 90 per cent of homes in B.C. and Alberta with the option of more than 500 digital channels.

The launch gives the nation's No. 2 telecom player a means to fight back against Shaw Communications Inc., the cable powerhouse that has been winning over home phone subscribers in the West. But to do it, Telus had to turn to a big rival for help - BCE Inc.'s Bell Canada.

Telus is re-selling Bell's satellite TV service under its own brand in return for an undisclosed distribution fee. It is the latest co-operation pact between the two companies, and a sign of just how much has changed in the two years since the country's dominant telcos knocked heads in a heated boardroom battle.

Back then, Telus made a takeover play for BCE , went public with it, then pulled out days later. Executives at Telus, which is run by long-time chief executive officer Darren Entwistle, complained about interference from BCE management and bias against their bid. Then-BCE chairman Richard Currie responded by calling Telus executives "complete amateurs."

But Mr. Currie and then-CEO Michael Sabia have since left BCE, leaving a new team in charge at Bell, led by former Telus executive George Cope.

And the two telcos' new mantra seems to be to work together where they can to take on increased competition from cable.

"I think there is a lot more they can do and I think there is a lot more they should do," said Dvai Ghose, an analyst at Genuity Capital Markets. "My view has been, look, if the regulators are not going to allow you to merge … it makes sense to cut costs" by doing small deals.

By The Numbers

Number of digital channels available in Telus's new satellite service.

100,000 Number of subscribers the company says it has signed up to IPTV in a handful of communities, including Vancouver, Calgary and Edmonton.

1.2 million Digital Television accounts with Shaw as of May 3. Shaw has also signed up about 774,000 phone subscribers, mostly at the expense of Telus's declining landline business.

The agreement helps fill a gap in Telus's product line while it builds out its own TV service over Internet lines, a technology known as IPTV. The company says it has signed up at least 100,000 subscribers to IPTV in a handful of communities, which include Vancouver, Calgary and Edmonton.

That number is small in comparison to Shaw, which said it had about 1.2 million digital television accounts as of May 3. Shaw has also signed up about 774,000 phone subscribers, mostly at the expense of Telus's declining land-line business.

The decision to partner with Bell and resell Bell's satellite service gives Telus the full bundle of services that other communications players package together and sell with a discount: phone, Internet, wireless and TV.

"The real advantage to us is to be able to expand instantly across our entire footprint to sell bundles to all of our B.C. and Alberta households," said Chris Langdon, vice-president of network services for Telus.

Neither Bell nor Telus will provide details of their agreement, including the duration of the distribution contract. But analysts say it benefits both parties. For Bell, which will continue to sell its satellite TV service under its own name in the West, the deal allows it to strengthen its national reach.

The nation's two largest phone companies are also co-operating on several other fronts in an effort to boost their competitiveness and reduce costs. Last October, they announced a plan to overhaul their wireless networks and convert to a new global standard to better compete with Rogers Communications Inc., as well as with several new mobile operators expected to launch services within the year.

Earlier this month, Bell, Telus and Rogers revealed that they have been co-operating on developing a way to turn mobile phones into electronic wallets. Through a jointly owned company called EnStream LP, the trio are collaborating on ways to make payments with a handset. Their first endeavour is an application called Zoompass that lets people send and receive money to each other using a cellphone.

But with the federal government committed to having more competition in the wireless business, there's a limit to how closely Telus and Bell can work together. And there's little talk of merger these days.

"I think many of those issues will have to have an antitrust inquiry before they can go forward, because these are massive behemoths and they can only perhaps get together on services that already have significant competition," said Neeraj Monga, an analyst at Veritas Investment Research Corp. "So I don't think it's that easy to figure it out."

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