BCE-MTS deal gets green light, creating carrier in Manitoba
After a nine-month review, BCE Inc. has won federal approval for its $3.9 billion acquisition of Manitoba Telecom Services, wrangling a deal with a small rural Internet provider to enter the province as a fourth wireless carrier to appease concerns the merger could hamper competition.
The Competition Bureau and Innovation, Science and Economic Development Canada approved the deal Wednesday on the condition that Bell divest wireless spectrum and subscribers to Xplornet Communications Inc., a Woodstock, N.B.-based company that has never before offered wireless services. Bell must also provide network access to Xplornet for five years and divest a quarter of MTS subscribers to Telus Corp.
The approval indicates the Liberals will follow the decade-long push to have four wireless players in each market. It comes despite the Competition Bureau’s conclusion that mobile wireless prices are higher in regions where the Big Three operators Bell, Telus and Rogers Communications Inc. don’t have competition from a strong regional competitor.
The bureau credited MTS’ existence as the reason Manitobans currently enjoy some of the lowest wireless prices in the country, stating that network quality, demand or demographics could not explain the price difference.
“Given the findings of our review, any future potential mergers by Canada’s three largest mobile wireless providers, Bell, Rogers and Telus, can expect to receive a close examination by the bureau,” Commissioner of Competition John Pecman said in a statement.
Yet Xplornet will only have an estimated two per cent of the wireless market share when the deal closes on March 17, a fraction compared to Bell MTS (44 per cent), Rogers (36 per cent) and Telus (18 per cent), according to an estimate from RBC analyst Drew McReynolds.
When the proposed merger was announced in May, MTS had about 50 per cent of the wireless market share, followed by Rogers (30 per cent) and Bell and Telus (10 per cent each).
Xplornet’s entrance into the wireless market came as somewhat of surprise to industry watchers that anticipated Shaw Communications Inc. might vie to become the fourth player in Manitoba with its Freedom Mobile unit.
“The party that was most interested in pursuing the Manitoba market is the one who now will be the fourth player,” BCE CEO George Cope said in an interview, referring to Xplornet. “They obviously had a very keen interest in the opportunity."
Cope would not comment on whether Shaw participated in negotiations. Shaw also declined to comment.
But he emphasized the deal is good for both shareholders and Manitobans, given Bell MTS will invest $1 billion over five years to upgrade the wireless network to LTE advanced and build fibre connections. “We’re talking about a significant upgrade in the technology for the people in that province,” he said.
Cope promised to maintain current MTS wireless price plan for at least a year after the deal closes, but said pricing will be up to the market after that.
“Our No. 1 interest is to keep the customers we have and grow that business, so we’re going to have to be competitive,” he said.
The deal adds about 710,000 wireless, Internet and IPTV subscribers, a five per cent increase for Bell that expands its national wireline footprint to 11.2 million households out of a total 15 million.
... Any future potential mergers by Canada’s three largest mobile wireless providers, Bell, Rogers and Telus, can expect to receive a close examination by the bureau.
Bell will update its 2017 financial guidance when it releases its quarterly results in April.
The financials surrounding the deal with Xplornet, a private company, will remain private. Xplornet saw the deal as a “unique opportunity” to get into the Manitoba market, spokesman James Maunder said in an interview.
“We’re always looking for opportunities to expand our business,” Maunder said.
Xplornet has yet to announce a launch date, but Maunder believes the company’s track record offering satellite service to rural Manitobans will convince residents to sign up for the nascent wireless service.