SaskTel sees ‘new unique challenge’ in Bell-MTS deal

Crown corporation SaskTel says its business may get riskier if BCE Inc. gets permission to acquire Manitoba Telecom Services.

The regional telecommunications carrier said Bell’s planned $3.9-billion takeover of neighbouring provider MTS represents a “new unique challenge,” according to a report released Monday, prepared at the premier’s request in response to a June independent risk assessment that found the proposed takeover may hurt SaskTel’s bottom line.

While most of the risks related to the Bell-MTS deal already existed, “in several cases the magnitude of risk has increased,” the report states.

Of the risks outlined in the original assessment by telecom consultant Mark Goldberg, SaskTel concluded the most fundamental risk lies in potential regulatory actions the federal government might take should it approve the deal. It is particularly concerned Ottawa would favour new market entrants in upcoming wireless spectrum auctions in a bid to encourage more competition.

“This could have impacts on SaskTel’s ability to acquire wireless spectrum at fair prices, as experienced in the past, along with increasing competitive threats within and beyond Saskatchewan,” the report states.

SaskTel is the incumbent provider in the province, and as such the federal government has treated it the same as the Big Three national players Bell, Rogers and Telus over the past eight years. But the report argues SaskTel should instead be treated as a smaller player, especially if the deal goes through and it winds up as the only major regional carrier in Western Canada.

“We should therefore not be discriminated against and put at a disadvantage vis-àvis the larger national carriers,” the report states, adding it intends to lobby Ottawa to treat it as a competitor.

SaskTel believes the Big Three already use their market power to implement “aggressive” regional pricing, which SaskTel claims hurts its ability to invest in its networks or return a larger dividend to residents.

SaskTel, however, noted it has successfully adapted to continually increasing competitive threats since the telecom regulator mandated competition in the early 1990s. While it’s paying attention to the Bell-MTS deal and Shaw’s play in the wireless market, it says it has strategies in place to mitigate these risks.

The Bell-MTS deal has led to speculation that a bigger player will acquire SaskTel, too. Privatizing the company could fill the province’s coffers at a time of growing debt, but Premier Brad Wall has said the public would get a say on such a move in an election or a referendum.

The federal government has not yet ruled on the BellMTS deal or outlined a clear telecom policy.

IMPACTS ON SASKTEL’S ABILITY TO ACQUIRE ... SPECTRUM.