BCE Inc. (Bell) has received all the regulatory approvals required to finalize its $3.9-billion acquisition of Manitoba Telecom Services Inc. (MTS).
But it did not happen before significant concerns were addressed by the Competition Bureau regarding the lay of the land for wireless competition once the deal is signed.
The deal is set to close March 17.
In addition to selling off about one-quarter of the combined wireless customer base of MTS and Bell in Manitoba to Telus for $300 million — as was originally proposed when the takeover was first announced last May — the deal that was approved by regulators provides for the entry of Xplornet Communications Inc. into the mobile wireless market in Manitoba.
Xplornet will acquire wireless spectrum from Bell MTS, 24,700 wireless customers — once Xplornet launches its mobile wireless service — five retail outlets in Winnipeg and one in Brandon. Telus will acquire about 120,000 Bell MTS wireless subscribers and 13 MTS retail locations following the deal’s completion.
In its statement regarding Bell’s acquisition of MTS, the Competition Bureau made it abundantly clear that it believed consumers in Manitoba would be negatively impacted if the number of wireless competitors was reduced from four to three. (In addition to MTS and Bell, Telus and Rogers also operate in Manitoba.)
To address that concern, the Competition Bureau required a fourth entrant into the market — Xplornet.
Mirko Bibic, Bell’s executive vice-president, corporate development, said Bell and MTS knew they would have to sell spectrum because, in combination, they were over the allowed limit.
“Once Xplornet came forward and expressed a keen desire to buy the spectrum and enter as a mobile player in Manitoba, we hammered out an agreement,” Bibic said.
Although it is not unusual for one company to sell wireless spectrum to another, Bibic said the rest of the package was designed specifically to provide a remedy to the concerns the Competition Bureau had.
Xplornet is a 13-year-old company that had previously offered only fixed wireless broadband and telephone service to about 300,000 rural residential and business customers across the country.
The deal also requires Bell MTS to provide a number of services to Xplornet, including access to Bell’s towers in Manitoba for a period of five years, temporary access to a mobile wireless network in a specified territory in Manitoba for a period of three years, support for wireless handset procurement for a period of five years, certain negotiated mobile wireless roaming services for a period of five years and discounts on Bell Media’s advertising inventory in Manitoba for a period of three years.
James Maunder, a spokesman for the privately held company headquartered in Woodstock, N.B., but run out of Markham, Ont., said Xplornet is excited about the new opportunities for the company in Manitoba, its first foray into the wireless mobile business.
The company would not disclose the extent of capital investment required to build out a wireless network in this province, but one industry source said it could be close to $100 million.
The Competition Bureau had the final word on the long-running debate about whether or not wireless rates in Manitoba were lower than elsewhere in the country and whether or not the existence of a strong fourth regional player impacted those rates.
As far as the Competition Bureau is concerned, the answer to both of those two questions is “yes.” That’s why the deal’s approval was contingent on the addition of Xplornet to the Manitoba market.
In its statement Wednesday, the Competition Bureau said that after extensive research it determined mobile wireless pricing in Saskatchewan, Thunder Bay, Quebec and Manitoba is substantially lower than in the rest of Canada because Bell, Telus and Rogers have competition from a strong fourth competitor in those regions.
Its research showed Bell offered a 5GB plan in Ontario for $105, but that same plan was offered for $60 in Manitoba. It also showed that Bell’s “flanker” brand, Virgin, offered on its website a 5GB plan in Ontario for $75 and offered that same plan in Manitoba for $48.
In its statement, the bureau found, “The proposed transaction would likely lead to a substantial increase in the price for mobile wireless plans due to the increased ability and incentive for a coordinated exercise of market power between Bell, TELUS and Rogers in Manitoba.”
In a statement, BCE CEO George Cope said, “Bell MTS is also announcing today that we will maintain current MTS wireless price plans for at least 12 months after the closing of the acquisition.”
Bell has promised an ambitious $1-billion program of capital investment in Manitoba over the next five years and to roll out its advanced Fibe TV and mobile LTE services in Manitoba in the coming months in addition to the promise to maintain current MTS wireless price plans for at least a year.
MTS CEO Jay Forbes was clearly pleased with the transaction. When he took over in January 2015, he had a mandate to try to wring a little more value out of company that was seen to be faltering after years of generous dividends. He sold the national enterprise network, Allstream, and concluded the Bell deal, about which shareholders are enthusiastically supportive.
“I think Manitoba consumers will fare very well in this transaction,” Forbes said in an interview. “The Competition Bureau makes sure that consumers will be in at least as good, if not better, position after the transaction. I have nothing but optimism. The future looks bright for MTS employees and for Manitoba.”
Since the beginning of 2015, the size of MTS’s workforce has been reduced by about 10 per cent from 3,000 to 2,700 mostly through a voluntary retirement package offered to employees.
Bob Linsdell, executive director of TEAM-IFPTE Local 161, the union that represents about 900 white collar workers at MTS (down from 1,250 two years ago) said his members are concerned about job security. He said while there has not been any indication that Bell intends to reduce the Manitoba workforce, there has also not been any assurances otherwise.
“Obviously, there are synergies to be achieved here,” he said. “We have an accounting department. They have an accounting department. You don’t need two accounting departments.”
BCE announced Wednesday it expects to capture additional cost synergies of about $100 million, twice the $50 million estimate it indicated when the deal was announced in May.
Read more by Martin Cash.
Xplornet lifts off
In December, officials from Xplornet Communications were in Florida for the launch of a new $500-million communications satellite that will improve Internet speed and reliability throughout the country.
And the company has another satellite set to launch early this year.
The privately-owned firm, reportedly worth around $1 billion, already services about 300,000 residential and business subscribers in rural and remote areas across Canada through a mix of cellular towers and satellites.
Granted, the satellites are not going to have any impact on Xplornet’s upcoming entry into the mobile wireless market in Manitoba, but they are an indication of the depth of commitment the company has in the Canadian telecommunications sector.
Jay Forbes, CEO of MTS, said that in addition to the significant investment Xplornet will make in the province, it has a solid track record of servicing rural and remote communities.
“What this means is that many places in the province will now have a third mobile wireless competitor,” he said. Prior to the Bell-MTS transaction, Bell and Telus did not have infrastructure in rural Manitoba.
James Maunder, Xplornet’s vice-president, public affairs and communications, would not say how many customers the company has in Manitoba. In terms of employees here, it currently only has a sales manager and licensed dealers, but Maunder said the company would definitely be adding staff.
Traditionally, Xplornet offers fixed-wireless broadband service, in which the Internet connection is wirelessly, transmitted either from cell towers or satellite to homes with the aid of a receiver device.
Rates are typically higher than those provided by telecoms with urban fibre-optic infrastructure. Xplornet’s current LTE packages in Manitoba offer up to 500 GB of data at an average price of about $70 per month.
— Martin Cash
Impacts, benefits and service changes for the companiesand their customers
Bell adds approximately 710,000 wireless, Internet and IPTV customers in Manitoba, a five per cent increase in Bell’s total broadband service subscribers.
Bell MTS becomes the No. 1 wireless provider in Manitoba, with more than 470,000 total pro forma subscribers; both Bell Mobility and Virgin Mobile customers get full access to the extensive MTS network in Manitoba.
Bell MTS will operate a total of 69 retail locations offering wireless and wireline services across the province; MTS products will be available for the first time in Bell, The Source, Tbooth wireless and WirelessWave locations.
Additional population coverage of approximately 1.28 million people and 540,000 households in Manitoba, increasing Bell’s national wireline service footprint to more than 25 million Canadians, or 11.2 million of the country’s 15.4 million total households.
Bell Media’s CraveTV video streaming service will be available to MTS TV customers as well as Internet subscribers.
Bell Business Markets adds the state-of-the-art MTS data centre in Winnipeg to its roster of 27 centres, the largest data-hosting network in Canada.