Bell takeover of MTS didn’t produce expected benefits, CCPA says

BCE Inc.’s takeover of MTS six years ago has not proved beneficial to the prairie province, a new study concludes. The Canadian Centre for Policy Alternatives issued For Whom the Bell Tolls: The Privatization of Manitoba Telecom Services and its Impacts in late June. MTS had been a publicly-held provincial Crown Corporation until 1996 when the Progressive Conservative government of Gary Filmon privatized it. It continued as a Manitoba firm until BCE bought it. “Today, MTS can hardly be said to exist anymore other than as a daub of jam on the lips of Bell Canada, the corporate giant which consumed MTS in 2017,” researcher Doug Smith wrote. “Where, in 1996, it employed 4,000 unionized workers, it now employs closer to 1,500. Someday corporate Bell will lick those lips and MTS will simply disappear.” Smith concedes that economies of scale occur when mergers occur and acknowledges that Bell did have corporate infrastructure in place. “They’ve got their own lawyers, they’ve got their own health plan,” he told the Wire Report in a telephone interview. “It’s another undermining of the local economy.” A native Manitoban, Smith was surprised to learn how “competition allergic” Bell is and its aggressive stance against organized workers. He said his focus started out on MTS but shifted to Bell as his report lengthened. MTS was formed when local municipalities petitioned the government in 1906 to take over Bell’s phone lines in the province. It continued as a public entity until the Filmon government introduced its privatization legislation in May 1996. One of the firms authorized to sell shares was Wellington West Capital. The move was not popular with Manitobans. Nearly 70 per cent opposed the sale, according to one survey, with rural residents hitting the 80 per cent level. Smith believes the privatization bill was one of the factors in the defeat of the PC government. “Following the defeat of his government in 1999, Gary Filmon would go on to serve on the board of the privatized MTS, where he earned over $1-million over a decade,” the report states. “He also became the vice-chairman of Wellington West Capital in 2001.” In 1998 Bell Canada and MTS founded Bell West, with the national phone giant owning 60 per cent and the provincial telecom holding the remaining 40 per cent. In 2004, Bell bought the minority stake from MTS while MTS purchased its outstanding shares from Bell. MTS attempted to become a national carrier by buying Allstream in 2004 for $1.7 billion but unloaded the property in 2016 for $465 million. By May of 2016, Bell expressed its interest in taking over MTS. As part of the regulatory approval for the takeover, MTS sold part of its wireless network to Xplornet (now known as Xplore Inc.). The smaller player never made a go of it and ended its Manitoba operations last summer. The move anticipated the requirement for Shaw Communications to divest itself of Freedom Mobile to Quebecor Inc. when Shaw was taken over by Rogers Communications Inc. Smith sees an eerie parallel in the two cases. “Our regulators in theory want four competitors but they seem to be happy with the situation if two big guys want to merge they will try to conjure up a fourth competitor out of little bits of sawdust and table sweepings,” he told the Wire Report. “And that certainly didn’t work in Manitoba with Xplorenet.” Nor has service improved when it comes to internet connectivity, the CCPA finds. Affordability is a problem in Manitoba and take-up of services is low. “When it came to the availability of high-speed internet Manitoba had the lowest rural percentage of availability (38.78 per cent) and the second lowest First Nations percentage (14.58 per cent) of availability of any Canadian province,” the study says. Smith says the experience in Manitoba stands as a lesson for Saskatchewan, home of Saskatchewan Telecommunications Holding Corp. SaskTel is the only publicly-owned major telecom in the country. He is surprised that the provincial government did not put the company on the block in keeping with its right wing politics. “The fact that the Saskatchewan government has restrained itself from selling it, made a non-ideological decision to maintain it, is a sign that it recognizes that it’s a valued public asset,” he tells the Wire Report. Around the time Bell was taking over MTS, then-premier Brad Wall said he would call a referendum on selling SaskTel. The move raised so much opposition that Wall cancelled the vote and the planning privatization. The CCPA report finds fault with the move to put public entities into private hands. “On many of its own terms, privatization has been a failure,” the study concludes. “Weak provisions had been put in place to make sure that the company did not fall into the hands of out-of-town investors. Either the privatized MTS failed to make needed investments–which is what Bell MTS claims to be the case–or in the five years after taking over the company, Bell MTS failed to make needed investments.” Smith feels better regulation will protect consumers from the monopoly power of the large incumbents. He concedes this is a global problem, pointing to last month’s announcement in the United Kingdom that Vodaphone and CK Hutchison were merging their operations to form the nation’s largest mobile carrier. –Reporting by Paul Park at ppark@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca.

Bell takeover of MTS didn’t produce expected benefits, CCPA says

News | July 5, 2023

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