Telus Takeover of Bell

[jdobbin]

The Tories stopped Telus and Bell from becoming income trusts.

Harper and the government have been quiet as several hungry buy-out companies have said they in the hunt for Bell.

As the Globe and others newspapers have mused, will the Tories feel compelled to step in and stop a coast to coast monopoly that will likely results in higher phone bills? For Montreal, it will probably result in the gutting of head office there. 2007 could be a bad year if Alcan and Bell head offices are both gutted.

It might be a popular decision to kill a merger but will they do it?

[Canuck E Stan]

It might be a popular decision to kill a merger but will they do it?

No

[madmax]

It might be a popular decision to kill a merger but will they do it?

No

Ditto

[jdobbin]

Ditto

It could end up costing them in Quebec for sure.

[Riverwind]

For Montreal, it will probably result in the gutting of head office there. 2007 could be a bad year if Alcan and Bell head offices are both gutted.

Bell is going to be severely downsized no matter who takes over. I would rather see a merger that keeps both companies publically listed than a leveraged buyout by private equity players.

[noahbody]

As the Globe and others newspapers have mused, will the Tories feel compelled to step in and stop a coast to coast monopoly that will likely results in higher phone bills? For Montreal, it will probably result in the gutting of head office there. 2007 could be a bad year if Alcan and Bell head offices are both gutted.

It might be a popular decision to kill a merger but will they do it?

I wouldn't worry about higher phone bills. Digital phone companies will keep the price down.

[jdobbin]

Bell is going to be severely downsized no matter who takes over. I would rather see a merger that keeps both companies publically listed than a leveraged buyout by private equity players.

That may be so. It will still be hard for Quebecers to see Montreal lose the head office.

[August1991]

Thanks for starting this thread, Dobbin. I hesitated to do it on my own.

"Hollow out". Watch for that term to become the next buzz word.

Bureaucrats controlling a pension fund of state employees (ie. government-forced contributions of Ontario teachers) compete with bureaucrats of a pension fund of all employed Canadians (ie. the CPP). Then politicians and bureaucrats will decide who wins. Such is Canada in the 21st century.

We can get away with this nonsense because we have such rich natural resources to share among such a small population, and most ordinary Canadians are civilized people who follow the rules. IOW, we dissipate our inheritance with such wasteful methods of choosing winners.

In Canada-world, bureaucrats and politicians decide winners. And to succeed in life in Canada, it is best to become a bureaucrat, or a politician. You'll become "God", and have the power to decide who wins.

Canadians will eventually regret having concentrated so much power in the hands of a few pension fund managers, bureaucrats and politicians. The concentration of power, particularly with so little oversight, rarely leads to much good in the long run.

----

Incidentally, did anyone else see the full page ads placed by Videotron calling for a market open to foreigners?

If I were Bernier, I'd let this deal go through and then abolish the CRTC and auction off bandwidth to the highest bidder, whatever the origin.

[geoffrey]

That may be so. It will still be hard for Quebecers to see Montreal lose the head office.

It wasn't hard for them to levy oppressive taxes and labour regimes on Bell though. Given the choice between BC and Quebec to have a head office location without any additional relocation cost, it's not tough.

I think if this merger goes through, it will become essiential to open the phone market to foreign competition. I don't quite understand why it isn't already.

[jdobbin]

Thanks for starting this thread, Dobbin. I hesitated to do it on my own.

"Hollow out". Watch for that term to become the next buzz word.

Bureaucrats controlling a pension fund of state employees (ie. government-forced contributions of Ontario teachers) compete with bureaucrats of a pension fund of all employed Canadians (ie. the CPP). Then politicians and bureaucrats will decide who wins. Such is Canada in the 21st century.

We can get away with this nonsense because we have such rich natural resources to share among such a small population, and most ordinary Canadians are civilized people who follow the rules. IOW, we dissipate our inheritance with such wasteful methods of choosing winners.

In Canada-world, bureaucrats and politicians decide winners. And to succeed in life in Canada, it is best to become a bureaucrat, or a politician. You'll become "God", and have the power to decide who wins.

Canadians will eventually regret having concentrated so much power in the hands of a few pension fund managers, bureaucrats and politicians. The concentration of power, particularly with so little oversight, rarely leads to much good in the long run.

----

Incidentally, did anyone else see the full page ads placed by Videotron calling for a market open to foreigners?

If I were Bernier, I'd let this deal go through and then abolish the CRTC and auction off bandwidth to the highest bidder, whatever the origin.

Hollowing out has been used a term since the 1990s. You should read the Globe story on it. Very informative.

It won't be up to Bernier. This falls right in Harper's lap. Too big a decision not to go there. Just like the income trust decision, it has to come from the top boss.

If Harper does let it happen, he will have to contend with the Montreal's loss of head office jobs.

[jdobbin]

It wasn't hard for them to levy oppressive taxes and labour regimes on Bell though. Given the choice between BC and Quebec to have a head office location without any additional relocation cost, it's not tough.

I think if this merger goes through, it will become essiential to open the phone market to foreign competition. I don't quite understand why it isn't already.

If they do let the merger happen, I suspect they will let the cable, TV and satellite markets be bought up.

We'll be served by Sprint and Verizon.

[geoffrey]

We'll be served by Sprint and Verizon.

Can you hear me now? Good! (Seriously).

[jdobbin]

It would appear that while Harper says he won't interfere in a merger, he won't prevent the bureaucrats from the Competition department from not doing it.

http://www.theglobeandmail.com/servlet/sto...2/BNStory/Front

The Harper government has signalled that it will leave ultimate approval of a possible Telus Corp. takeover of BCE Inc. to regulators, a move officials say means a telecom merger would face greater hurdles than other potential bidders in winning Ottawa's blessing.

A spokeswoman for Industry Minister Maxime Bernier refused to comment on Telus's discussions with BCE, but said such deals would be governed by existing laws, including those giving the Competition Bureau authority to vet such transactions.

"The government has in place clear foreign investment limits ... as well as competition rules under the Competition Act," Isabelle Fontaine said.

"Any prospective transaction affecting the ownership of a Canadian firm in the telecommunications and broadcasting sectors would have to comply with these rules."

Estimated job losses from the merger are said to be about 30,000 workers.

[sharkman]

I didn't realize the merger was such a complicated beast. Is Sprint in the market again? In the west, they've entered then left at least twice, the second time selling their long distance customers to Rogers, and I was not impressed.

In Canada we seem fairly content to have almost monopoly like conditions. Our banking, car insurance, gas stations, local phone service, airlines and cable all have only a few competitors whereas in the States, competition abounds. The loss of competition if these two companies merge would definitely be harmful.

[geoffrey]

Estimated job losses from the merger are said to be about 30,000 workers.

That's sad, but it makes the company more efficient. It's not the worker's money anyhow, it should be the decision of the shareholders and if they get appropriate value for their investments. Shareholders pay taxes to deal with the externalities of a deal such as this.

Why we care so much about protecting redundant jobs, I'm unsure. This isn't depression era, they may have to move but there are plenty of jobs in Canada for them to fill up. Job losses are good, they ease our labour shortage out west.

The loss of competition if these two companies merge would definitely be harmful.

Indeed. As long as we keep the 20th century view that Canadian industry is better than everyone else, that will continue. We need to allow foreign competition. There simply isn't enough investment capital in Canada for us to start brewing up new phone companies, banks, airlines or whatever else you want. I do know there are plenty of foreign companies dying to offer us cheaper services.

[jdobbin]

That's sad, but it makes the company more efficient. It's not the worker's money anyhow, it should be the decision of the shareholders and if they get appropriate value for their investments. Shareholders pay taxes to deal with the externalities of a deal such as this.

Why we care so much about protecting redundant jobs, I'm unsure. This isn't depression era, they may have to move but there are plenty of jobs in Canada for them to fill up. Job losses are good, they ease our labour shortage out west.

I think what we are reading from Harper's hands off statement is that he will let the Competition bureau do the work that he doesn't want to put his name to. In other words, a merger will be allowed but only if Bell or Telus sells their wireless.

Quebecers won't move in large numbers to B.C. and Alberta. It will be a tough sell politically for Harper is much the same way that it was a tough sell on income trust taxation.

[Michael Bluth]

It would appear that while Harper says he won't interfere in a merger, he won't prevent the bureaucrats from the Competition department from not doing it.

So Harper has said he will allow the regulators to do their jobs.

Is that what the quoted sentence is trying to say?

You tried to link this to Income Trust.

wow

One Trick Pony

[kimmy]

I'm sure a merger would be great for the shareholders, but it's going to pretty much suck for the customers and definitely suck for the employees.

Aside from wiping out thousands of jobs, it also leaves a single entity with a near monopoly presence in Canadian telecommunications. Merging with their major competitor leaves Telus and Bell with no reason to offer the customer competitive rates. What options are left for consumers? A handful of pint-sized cellular companies.

-k

[August1991]

I'm sure a merger would be great for the shareholders, but it's going to pretty much suck for the customers and definitely suck for the employees.

But it would be a Canadian company.

Andrew Coyne has a good column on this:

There is one, and only one condition on which this deal should be allowed to proceed: That the Canadian telecoms market is thrown open to foreign competitors, as is the case in most other countries. Indeed, liberalization should come before consolidation. Telus wants to be able to lock up the Canadian market beforehand, to fortify it against the "inevitable" onslaught of foreign competition. But that has things back to front. Only when an open and competitive market has been established, without barriers to entry, should the existing players be permitted to merge.

National Post

Coyne fails to note however that the two main suitors of Bell were American firms using Canadian public pension funds (CPPIB and Teacher's) as proxies. The three largest pension funds in Canada are the CPPIB, Teacher's and the Caisse. All three have access to obligatory contributions, a tax by any other name.

In Canada, we have concentrated enormous power to decide our future in the hands of a few people who have very little oversight.

Incidentally, has anyone noted why Bell is a target of a takeover? (That is, has anyone wondered why its "assets" are undervalued?)

So Harper has said he will allow the regulators to do their jobs.

I suspect that Harper doesn't want to be seen to get involved. But he knows what the Competition Bureau will do. (Study it to death.)

[jdobbin]

I'm sure a merger would be great for the shareholders, but it's going to pretty much suck for the customers and definitely suck for the employees.

Aside from wiping out thousands of jobs, it also leaves a single entity with a near monopoly presence in Canadian telecommunications. Merging with their major competitor leaves Telus and Bell with no reason to offer the customer competitive rates. What options are left for consumers? A handful of pint-sized cellular companies.

Moreover, Telus and Bell along with Rogers are trying to prevent more bandwidth to be sold for wireless.

[jdobbin]

But it would be a Canadian company.

Andrew Coyne has a good column on this:

There is one, and only one condition on which this deal should be allowed to proceed: That the Canadian telecoms market is thrown open to foreign competitors, as is the case in most other countries. Indeed, liberalization should come before consolidation. Telus wants to be able to lock up the Canadian market beforehand, to fortify it against the "inevitable" onslaught of foreign competition. But that has things back to front. Only when an open and competitive market has been established, without barriers to entry, should the existing players be permitted to merge.

National Post

Coyne fails to note however that the two main suitors of Bell were American firms using Canadian public pension funds (CPPIB and Teacher's) as proxies. The three largest pension funds in Canada are the CPPIB, Teacher's and the Caisse. All three have access to obligatory contributions, a tax by any other name.

In Canada, we have concentrated enormous power to decide our future in the hands of a few people who have very little oversight.

Incidentally, has anyone noted why Bell is a target of a takeover? (That is, has anyone wondered why its "assets" are undervalued?)

I suspect that Harper doesn't want to be seen to get involved. But he knows what the Competition Bureau will do. (Study it to death.)

Bell's assets have under performed because of misguided diversification programs over the years. Having said that, there isn't an asset in Canada that could not be bought by large investment funds. Bell used to be too big to eat. Now there are few assets in the world that couldn't be had for a price.

Some are saying Telus and Bell are vulnerable because they were not allowed to become income trusts.

Coyne is right that the market should have been open to competition. At the moment, Harper will take a hands off approach but if 30,000 people are laid off and then the combined company raises rates to cover the purchase price while being protected from competition, then you are going to have some people who are really steamed.

In any event, if a few thousand head office jobs in Montreal go west, there will be a price to be paid by the government in power.

[geoffrey]

Quebecers won't move in large numbers to B.C. and Alberta. It will be a tough sell politically for Harper is much the same way that it was a tough sell on income trust taxation.

Tough. If they don't want to move, then that's too bad. There are plenty of jobs, if people don't want them, we shouldn't have to build our economy around that stubborness.

Incidentally, has anyone noted why Bell is a target of a takeover? (That is, has anyone wondered why its "assets" are undervalued?)

It's not neccessarily the value of the assets but the value of the cash flows from the assets that determine a fair unit price for a company. Looking post-acqusition, Telus sees that the increased productivity (less people per customer) between the two companies increases the cash flow per unit (or even cash flow per asset if you want to look at it that way). This increases the value of the company to Telus, and not neccessarily anyone else. That's why Telus can offer a stronger bid.

Why the other companies are interested? Perhaps their long-term strategies include further investment in telecom and they think they can see the same productivity increases.

Most investors look for long term grow, but big institutionals look mostly at cash flow. Bell, Telus, TransAlta... three examples of companies that have less-than-inspiring income, but large, reliable cash flows. Accounting income is less important than physical cash to be distributed to the owners.

[jdobbin]

Tough. If they don't want to move, then that's too bad. There are plenty of jobs, if people don't want them, we shouldn't have to build our economy around that stubborness.

You might not like it but Harper has shown that he will cater to Quebec when necessary. I think the budget is a good indication of that. If he thinks that he will be hurt politically in Quebec, he won't be saying "tough". He'll be saying, "What can I do ease the pain?"

[geoffrey]

You might not like it but Harper has shown that he will cater to Quebec when necessary. I think the budget is a good indication of that. If he thinks that he will be hurt politically in Quebec, he won't be saying "tough". He'll be saying, "What can I do ease the pain?"

And the rest of us will be saying "What can I do so I don't have to give all my money to Quebec?"

[Michael Bluth]

And the rest of us will be saying "What can I do so I don't have to give all my money to Quebec?"

That's a very interesting question.

The last PM to not cater to Quebec was Joe Clark.

Clark's mistake on that lost budget vote was thinking the Créditistes would behave rationally. Clark didn't want to cater to their requests. He thought they were bluffing, because the Créditistes were all facing certain defeat in a coming election.

Catering to Quebec is why the Liberals have been called Canada's natural governing party.

Canada is a better country if the Liberals don't get to govern for decades at a time without being challenged.