Bell Canada owner BCE Inc.’s bid to purchase Manitoba telecom provider Manitoba Telecom Services (MTS) could lead to better service according to one industry analyst, but higher prices according to another.
Mark Goldberg, owner of Thornhill, Ont.-based consulting firm Mark H. Goldberg and Associates, says that despite MTS’s popularity in its native province – it reportedly has the largest market share of wireless customers in Manitoba, more than 50 per cent – the company had been cash-strapped for the better part of the last decade, shedding more than 1,200 employees last year and selling Allstream, its enterprise services division, in January.
“I think it’s a great opportunity [for MTS customers],” he says. “I fully expect that the terms of their current deals won’t change one iota… If anything it could result in even better service, because I expect this deal to result in increased investment by Bell, which means all of the service providers are going to have to up their game in Manitoba.”
Bell, which had trouble gaining a foothold in the province, will now be able to invest its significant resources into upgrading MTS facilities and services including its LTE platform, Goldberg says, noting that Bell’s purchasing power could also lower the hardware costs associated with those services, including handsets.
“Bell buys in bigger volumes, and can pass those kinds of savings onto consumers,” he says.
Under the proposal, which Bell and MTS announced earlier today, BCE will pay approximately $3.9 billion for MTS, including approximately $0.8 billion in debt, and add the company’s 2,700 employees to its workforce, with the MTS head office in Winnipeg becoming Bell’s western Canada headquarters.
BCE also committed to investing $1-billion over five years to expand Manitoba’s broadband and wireless infrastructure, including its LTE network, which Bell said would provide customers with average data speeds twice as fast as those now currently offered by MTS.
The combined company’s Manitoba operations will be known as Bell MTS.
As part of the deal, one third of existing MTS postpaid wireless subscribers would be transferred to Telus Inc., which released a statement of its own today, saying the company had reached an agreement in principle with BCE that would also see one-third of its dealer locations in Manitoba assigned to Telus once BCE’s purchase concludes.
In a note to investors, broker Canaccord Genuity noted the Telus deal would ensure that none of the wireless incumbents in Manitoba would have a 50 per cent market share. It would also ensure that Telus won’t make a competing bid for MTS, the firm’s analysts noted.
Telus spokesperson Shawn Hall told ITBusiness.ca the company would not be commenting today beyond the release.
As for how the transfer will play out – which customers will be transferred from MTS to Telus, or whether they will have a choice – Goldberg says there are no details at present, and that during an initial call when Bell announced the deal, its representatives were asked the question and did not provide a definitive answer.
“I expect that the customers who would be transferred are the customers who are wireless-only,” he says. “The question is how many of their customers are wireless-only, and I would suspect that either a total or portion of those would be the folks who might have their contractual terms and conditions handed off to Telus.”
Asked how the transfer would occur from a regulations standpoint, Canadian Radio-television and Telecommunications Commission (CRTC) representative Patricia Valladao told ITBusiness.ca that until the organization receives the application and analyzes it they will not be able to say for certain which regulations will come into play.
Goldberg expects that with a full third of MTS customers, which he estimates currently number around 140,000, being transferred to Telus, other carriers will release promotions attempting to woo customers who are no longer under contract – and who, for whatever reason, made an explicit decision to not become Telus subscribers in the first place.
“Keep in mind that under the Wireless Code, you really don’t have a contractual commitment to stay with whomever you’re with – that at worst, you have to buy out the device subsidy,” he says. “And so I think, at least for a time, there’s going to be an opportunity for people to strike some very attractive deals in Manitoba.”
Goldberg also believes that existing MTS customers don’t have to fear the terms of their current deals could be changed, because under the CRTC’s Wireless Code, service providers may not change the “key contract terms and conditions” of a post-paid wireless contract without a customer’s informed and expressed consent.
Indeed, what the Wireless Code defines as “key contract terms and conditions” includes the services included in the contract and any limits on the use of those services that could trigger overage charges or additional fees; the minimum monthly charge for services included in the contract; the early cancellation fee; and the retail price of their device, if a subsidized device is provided as part of the user’s contract.
Not everyone shares Goldberg’s enthusiasm for the deal. In May 2 blog post, University of Ottawa law professor Michael Geist writes that he fears Bell’s takeover of MTS will likely mean higher prices for wireless customers in Manitoba.
“With the four competitors in Manitoba – Bell, Telus, Rogers, and MTS – the province features some of the lowest wireless prices in Canada,” Geist wrote.
For example, he wrote, Bell’s unlimited nationwide calling share plan in Manitoba is $50, while the same plan in Ontario is $65. Data cost differences are even greater: Bell offers 6 GB per month for $20 in Manitoba, but for $50 in Ontario. Rogers and Telus also offer lower pricing in Manitoba, he added.
“The reason is obvious: the presence of a fourth carrier creates more competition and lower pricing,” he wrote. “With MTS out of the way – and Bell and Telus sharing the same wireless network – prices are bound to increase to levels more commonly found in the rest of the country.”
Nigel Fortlage, vice-president of IT with the Winnipeg office of brokerage firm (and MTS customer) GHY International, says that he was concerned when he first heard the news as well, noting that customer service rarely tends to be the forte of a behemoth like Bell, and that the MTS deal is only going to make them larger.
“From my experience, there is no ‘great’ telco company, but if I was to compare them – MTS versus Bell – I would take an MTS over a Bell,” Fortlage says. “So from a service perspective, it concerns me. I know that from an innovation perspective Bell has a much larger portfolio, so perhaps they will bring new and innovative ideas that we don’t have available to the market much quicker for Manitoba businesses, but that has yet to be seen in terms of reality.”
Neither Bell nor MTS responded to requests for comment by press time.
With files from Howard Solomon.