Telecom commentators consider ‘Bellus’

Industry observers have mixed reviews about a potential BCE Inc.-Telus Corp. merger. While some are intrigued by the wireless-spectrum carrot that Telus' chief executive has thrown into the mix, others are worried about the customer impact.On June 20 and 21 BCE and Telus each said it was talking to the other about joining forces, confirming a rumour that began weeks ago when BCE announced that it was considering financial options.In a conference call, Telus CEO Darren Entwistle pointed out that if regulators supported Telus' acquisition of BCE, his company would be willing to support a set-aside of spectrum in the upcoming auction for wireless licences, to offset government concerns about market consolidation. A set-aside could give rise to a new wireless communications service provider, and increase competition in the telecom field, effectively equalizing the decreased competition that could occur if BCE and Telus combined.Johanne Lemay, co-president of Lemay-Yates Associates Inc. in Montreal, says it's interesting that Telus would offer to support a set-aside. The BC carrier opposed the very thing just a few weeks ago, concerned that the telecom sector wouldn't support a fourth national wireless player.But she notes that Telus wouldn't even consider linking with BCE if regulators were adamant that the new combined entity would have to sell Bell Mobility, the wireless side of BCE's telecom operations, to address consolidation concerns. Given that, it's no wonder that Telus offered to support a set-aside, she says.Brownlee Thomas from Forrester Research Inc. says Telus should have to go further to appease competition concerns. The firm should have to sell some of its wireless assets, including interest in Inukshuk, the joint Bell Canada/ Rogers Communications Inc. provider aiming to serve rural Canada. Telus should also have to withdraw from the spectrum auction. "It's really about the conditions to support competitive entry," Thomas says.Roberta Fox from Fox Group in Mount Albert ON says she's worried about the effect on customers. Will prices for telecom services go up as a result of the proposed consolidation? In the business market, telecom buyers commonly entertain bidding wars between competing service providers. Will that all end? "It raises a red flag," Fox says.On his blog, telecom consultant Mark Goldberg (Mark H. Goldberg & Associates) says mobile and business services are the real concern. "It seems clear to me that wireless and enterprise will need to be spun out from a combined Bellus, no doubt causing significant upheaval for customers."That means great opportunities for competitors picking up the pieces," he says, suggesting that "customers unhappy with being traded around like baseball cards" might be willing to consider services from other providers, less distracted by financial finagling.In press statements and during the conference call, Telus put a positive spin on competition and products, particularly for consumers. The company said a combined BCE-Telus would build products faster, innovate quicker, and invest in new technologies with an economy of scale neither could achieve alone.Entwistle said the entity would have a national perspective derived from its parents, two Canadian telcos. This was a backhanded comment on other groups discussing a buyout of BCE, some of which include US private equity firms on their teams.For Thomas, it recalls WorldCom's acquisition of MCI in 1998 in the US. UK service provider British Telecom was making a play for MCI, but WorldCom "came to the rescue" with a US-born solution. "It was embraced," Thomas says, adding that although WorldCom eventually collapsed, Telus is not in the same position. Still, the national bent is similar. And Telus may well convince the industry that it's better to have one big Canadian player in BCE/Telus than see BCE bought by foreign investors, who might afterwards set their sites on Telus and MTS Allstream Inc."It looks somewhat inevitable," Thomas says of the BCE-Telus marriage.

Telecom commentators consider ‘Bellus’

News | June 22, 2007

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