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June 2007 Archives

The big business story of the day is a possible deal involving TELUS and BCE.

The main focus of the stories in the press is the wireless business. That's a very important consideration with respect to the possible deal, but folks are missing the rest of the story.

BCE controls Canada's largest wired-line network. Reporters and analysts are dismissive of Bell's wired-line phone business as a major factor in the deal -- and rightly so, I think. But let's not throw the baby out with the bath water.

That network is already being used for more than just telephony. For a long time, Bell has been an Internet Service Provider (ISP) using that network. And, for years, they've been working on an Internet Protocol TV (IPTV) service that would use that same network infrastructure. Future converged services will also run atop that network. So... unlike a real estate ad that says "and broadloom where laid", we can't be dismissive of this proposition that effectively includes "network where laid".

TELUS, like Bell, is a telco at its roots, and, like Bell, it is using its telephone network for much more than conventional voice traffic. TELUS is an ISP and TELUS is also deploying IPTV (more rapidly than Bell, from what I can tell). For TELUS to grow any segment of their business that isn't based on wireless, what are the options? Well, you can build a new network in another geography, but that's a huge capital expenditure (and telco's are capex averse these days), or you can buy a network that's already built like Bell's.

And let's not forget Bell ExpressVu, BCE's satellite TV business. TELUS is developing a TV business (via IPTV)... why not extend that to satellite? And what easier way than to buy an incumbent, and avoid all of the licensing application costs associated with launching such a service, only to risk being turned down? And hey, at the same time, TELUS would get to compete with arch-rival Shaw Communications (operator of the Star Choice satellite TV service). For Darren Entwhistle, President and CEO of TELUS, it probably doesn't get any better than this.

Analysts are saying that any proposed deal would fall apart if the CRTC forced divestiture of one of the mobile operations (Bell Mobility or TELUS Mobility). Well, I think the CRTC would be right to make that a condition of any deal -- we need more, not less, competition in that space. However, when we consider the value to TELUS in the Bell Canada network and Bell ExpressVu, I'm not convinced that such a divestiture would be a deal breaker.

TELUS says "the future is friendly". If they can buy Bell at a reasonable price, the future will be friendly for them indeed.

[Note: I've already been taken to task for not discussing copper's limitations, or the need to continue to upgrade the network to fibre optics, but I wanted to keep the post short. My bad.]

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