Fundamental risk for SaskTel after Bell deal to buy MTS: report

REGINA – A report says the takeover of Manitoba Telecom Services by Bell poses serious risks to Saskatchewan’s provincially owned telecommunications company.

The analysis of SaskTel says the “most fundamental risk” is that reduced numbers of carriers in Manitoba could lead the federal government to create incentives for additional wireless competition.

“Such measures could reduce the costs for competitors and increase costs or restrict capacity expansion for SaskTel,” says the report which was released Monday.

It says the first manifestation of that risk could be in establishing the rules for the newly repurposed broadcast spectrum 600MHz band in the next 12 months.

The report says the 600MHz band is attractive for mobile services because it needs fewer sites for coverage and the signals are much better at penetrating buildings.

But the 28-page analysis notes that in the 2014 auction of the 700MHz spectrum, most of the space ended up being acquired by Rogers (TSX:RCI.B), Bell (TSX: BCE) or Telus (TSX:T) in virtually every region of the country.

There are further concerns that Ottawa could back away from a stated objective to have four wireless carriers operating in every market.

The report says there’s also a risk that establishing Winnipeg as a western headquarters for Bell could “lead to an erosion of SaskTel’s share of the Saskatchewan business market.”

“The big question will be with Bell on our border, what will Bell do in Saskatchewan? How hard would they come after our business customers? How hard will they come after our consumers?” said SaskTel president and CEO Ron Styles.

Styles said the consequence could be “more pressure on the bottom line.” A hit to SaskTel’s net income could reduce the amount of dividends the corporation returns to provincial coffers.

The MTS (TSX:MBT) and Bell deal still requires approval from regulators, including the federal government and the Canadian Radio-television and Telecommunications Commission.

SaskTel will be talking with those regulators, said Styles.

“If you want to support smaller carriers, you need to make sure that there’s a regulatory environment that’s going to allow us to continue to thrive.”

In wireless, SaskTel competes against three large national competitors: Bell, Rogers and Telus. Shaw does not currently have mobile wireless radio spectrum in Saskatchewan.

Reports, including one submitted to regulators in 2014 by MTS and other regional carriers, showed prices are lower in provinces where Bell, Rogers and Telus face an additional competitor.

Manitoba Premier Brian Pallister has said prices will probably rise if the sale goes though, but service will be expanded into current dead zones and speed and reliability will improve.

Saskatchewan Premier Brad Wall said the analysis is about making sure there’s a plan to protect SaskTel jobs and revenue. He emphasized that the risk analysis does not mean the province is looking to sell SaskTel, which is protected under legislation.

“I don’t think that situation’s going to arise, but if it did, we would not do anything different with respect to the ownership of SaskTel without a clear and voted mandate by the people of Saskatchewan,” said Wall.