June 20, 2016 12:46 pm
Updated: June 20, 2016 8:37 pm

SaskTel profits may be at risk following MTS buyout: report

WATCH ABOVE: SaskTel profits may be at risk as telecom industry continues to change

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SaskTel has released its risk assessment on what the potential impact of Bell buying Manitoba’s regional telecom company, MTS, and it may affect the Crown Corporation’s bottom line.

The review was completed by Mark H. Goldberg & Associates Inc, an independent third party.

The report will also become part of the strategic planning process that SaskTel undertakes annually and part of the process the Corporation will help develop strategies to mitigate identified risks.

“The report provides an excellent high-level assessment of the potential impacts this transaction may have on SaskTel,” said Ron Styles, SaskTel President and CEO.

“It is also worth noting that some of the risks in the report are not new to the corporation; however, those risks may increase due to this acquisition.”

Below are some of the main risks that are outlined in the report:

  • The possibility that reduced numbers of facilities-based carriers in Manitoba could lead Federal government policy makers to create incentives for additional wireless competition to develop through lower costs for new entrant spectrum or other measures. Such measures could reduce the costs for competitors and increase costs or restrict capacity expansion for SaskTel.
  • The further concentration of the market in Manitoba could see removal of the four carriers objective by the Federal government, possibly enabling Shaw to sell its acquired WIND Mobile business or partner with other telecoms. If Shaw launches a competitive mobile service, there is a risk that SaskTel’s consumer communications services will face significant pressure from a second bundled service package in Saskatchewan.
  • There is a risk the establishment of Winnipeg as a western headquarters for Bell could lead to an erosion of SaskTel’s share of the Saskatchewan business market.
  • There is a risk that Rogers will look to replace its lost partnership with MTS by developing retail partnerships with cable companies in Manitoba and Saskatchewan. This would improve the competitive positions of Rogers, as well as local cable companies.
  • For the reasons identified in the report, there is a risk that SaskTel’s net income will be unable to support the level of dividends that have been returned to the province in recent years.

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    “Our net income could drop because of this, and it’s probably going to continue to put pressure on us to build,” Styles said.

    “We need to up our game to improve our networks, and provide more products and services.”

    Styles added, “SaskTel has been extremely successful in the highly competitive communications industry for decades and we will continue to work hard to develop and implement a successful strategic business plan that meets the needs of Saskatchewan residents.”

    Premier Brad Wall said he’s confident SaskTel will be able to meet the challenges outlined in the risk analysis. On the topic of potentially selling SaskTel, Wall said that the offer would only be entertained if it benefits employees and provides better infrastructure to the province.

    However, he said since the Saskatchewan Party campaigned on upholding the Crown Protection Act, with the exception of the Saskatchewan Liquor and Gaming Authority, it potentially selling the SaskTel wouldn’t be a government decision.

    “I don’t think that decision’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,” Wall explained.

    SaskTel is the leading Information and Communications Technology (ICT) provider in Saskatchewan with over $1.2 billion in annual revenue.

    With files from David Baxter

 

© 2016 Global News, a division of Corus Entertainment Inc.

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