Skip to main content

The current generation of Canadian telecom CEOs are experienced deal makers, adapt at building their businesses through acquisitions.

That dog no longer hunts. In the wake of BCE's takeover of Manitoba Tel this spring, domestic telecom companies have nothing left to buy. The only obvious targets are the family-controlled cable businesses, and it's highly unlikely one will come up for sale. There's no easy path to expansion outside Canada, an approach that's being used in other mature sectors, such as banking, retail and utilities.

Which means successful chief executive officers such as BCE's George Cope and Telus's Darren Entwistle, and their successors, need to set aside well-honed acquisition skills and instead focus on eating their own cooking, by boosting profits from the collection of businesses they've assembled through years of takeovers.

Story continues below advertisement

Going forward, winning the battle for the consumer is the obvious path to success for the country's five dominant telecom companies – BCE, Telus, Rogers Communications, Shaw Communications and Quebecor. That's got to be good news for a country that loves to complain about the cost and quality of cellphone and cable coverage.

Investors in telecom stocks, however, will experience something akin to giving up their morning caffeine fix. It's hard to replace the financial kick that comes from acquiring a smaller rival. Buying Manitoba Tel increased BCE's cash flow by $500-million this year, when it can take advantage of tax benefits, and more than $200-million annually going forward. Mr. Cope needs to sell a whole lot of Bell Fibe subscriptions to match that jolt.

With takeovers off the table, we're going to find out which telecom company has the best homegrown strategy for winning market share, and more importantly, who can execute on these plans. This will be a true test of each company's management expertise.

We'll find out which team is best at controlling costs in a sector that demands constant investments in networks. We'll see who can predict what fickle consumers want in a world that reinvents itself around each generation of cellphone.

Winners and losers will be relatively easy to determine, as financial results from core phone and cable operations are easy to compare across the five biggest companies. And each CEO is going to be judged on the merits of what they have built, as there are significant differences in the business mix at each company.

BCE, Rogers and Quebecor embraced sports, TV networks and other content as a way to lure customers to their telecom offerings. Telus's Mr. Enwistle, on the other hand, has openly questioned the value of owning media businesses, and instead took Telus into sectors such as health-care technology. While it's possible each company has made winning bets, past experience with diversification by telecom companies tells us someone in the sector is going to stumble.

For Canadian politicians, a competitive telecom sector with five deep-pocketed players represents the regulatory promised land: Consumers should benefit from fierce competition on price and service.

Story continues below advertisement

For CEOs, and the boards of the telecom companies, deal-making prowess that was valued in the past becomes less important. In military terms, generals skilled at blitzkrieg will be replaced by leaders well versed in trench warfare. The next generation of CEOs will be adapt at marketing and technology, rather mergers and acquisitions.

And for investors, the Canadian telecom companies will evolve into dividend plays, rather than growth stocks that were able to feed profits by gobbling up smaller rivals.

The Blue Jays are worth $1.3-billion (U.S.) even though they’re playing bad baseball. Business columnist Andrew Willis thinks the new CEO should sell the team and make Rogers a pure telecom play. The Globe and Mail
Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter