TORONTO – BCE’s proposed acquisition of MTS will not only contradict the previous government’s push for four wireless players in every market, it could open the door for further consolidation in the rest of the market.
Canaccord Genuity Corp. analyst Aravinda Galappatthige said approval of the $3.9 billion BCE/MTS deal would “set a significant precedent, as it would reduce Manitoba to a three-player wireless market from four.”
“As a result, we also believe that this would give Shaw a potential exit strategy in wireless should it decide to sell Wind”, he wrote in a client note Monday. “In addition, we believe it could reduce regulatory opposition to the sale of Quebecor’s non-Quebec spectrum assets.”
While BCE’s plan to sell approximately one-third of MTS' postpaid wireless customers to Telus will ensure that none of the incumbents would have a 50% market share in Manitoba (which MTS does now), Galappatthige added that “regulatory risk due to wireless concentration concerns remains an issue”.
He also said that he does not expect a competing bid for MTS, noting Rogers’ much higher wireless subscriber share in Manitoba (~33%) compared to BCE (~6%).
That said, both Shaw and Rogers could object to the deal on competition or policy grounds as competing companies are no stranger to using regulatory means to make life difficult for their competitors and procure better results for themselves. Shaw Communications did not respond to an emailed request Monday for comment on the deal.
As well, if you look around the world a number of governments or regulatory bodies – in the name of preserving competition and protecting consumers – such as the United States, France, Denmark, and Italy have all rejected deals or are investigating certain telecoms' plans to consolidate their markets further. Will Canada's government look to be on the same side as others when it comes to this deal, which not only leaves just three wireless competitors in Manitoba, but also now just two main television suppliers in Winnipeg, down from three?
As well, Manitobans now pay the lowest wireless rates in the country. Will that continue or will prices go up? BCE president and CEO George Cope was asked those questions directly by financial analysts during the two companies' conference call Monday morning.
When one analyst asked specifically about pricing in the province, noting the lower prices enjoyed there, Cope said: "Clearly Telus’ position in the wireless industry is significantly enhanced in this transaction, as is Bell, and so you would expect, I think, the market to continue to be competitive as it has and if not maybe even more as a result of all this but we’ll see how that unfolds."
Another analyst, Scotiabank's Jeff Fan, also specifically asked Cope: “How confident are you that the government is actually changing their policies with respect to the number of operators in any particular market going from four to three, or is this really just a transaction to try to test that policy, given we have a new government?”
Cope responded only by saying: "We look forward to working with the three regulatory groups we talked about. We think it will be a nine-to-12 month process and we’ll just follow that process and work respectfully with the regulators.”
Finally, when BMO analyst Tim Casey asked about making spectrum concessions to the federal government, if asked, in order to get this deal done, Cope said: “We will work with the regulator over the next nine months to meet the requirements they have or don’t have and so we’ll see how that evolves."
