Who thinks that TELUS and Bell can combine without having to spin out lots of assets?
I disagree with Greg O’Brien’s assessment in CARTT:
Using year-end 2006 figures, a “Bellus” would own approximately 82.5% of the traditional telco customers in Canada. What’s that you say, the telecom field is hyper-competitive with many newcomers like cable and others? Even factoring those in, a Telus-Bell combo would own 77% of all local lines in the country.
As a consumer, those are hard to swallow numbers. Potentially anti-competitive numbers.
In my view, Bell and TELUS don’t compete today for residential local lines other than where wireless competes for wireline substitution. Each has maintained a regional focus in the residential sector.
It is on the wireless and enterprise side that competition concerns should arise. As such – it seems clear to me that wireless and enterprise will need to be spun out from a combined Bellus, no doubt causing significant upheaval for customers.
That means great opportunities for competitors picking up the pieces; opportunities from buying pieces being spun out and opportunities to win customers unhappy with being traded around like baseball cards.
What kind of distractions would this merger cause for management? What kind of chaos will this cause for national and multi-national enterprise customers?
Let me paint an alternate scenario. Start by looking at the most likely assets to be permitted to be retained by the combined entity. That creates a list of assets that could be sold to TELUS by the victorious acquiring private equity firm and also identifies the assets that would need to be dealt elsewhere.
TELUS and Bell talking to each other helps crystallize a dissolution plan and perhaps helps drive improved valuations from the remaining bidders.
After the dust settles, I’d suggest that telecom in Canada will remain competitive, thanks to Rogers and MTS Allstream on a national level and cablecos such as Shaw and Videotron on a more regional level.
A merger of Bell and TELUS may create an opportunity for someone (or some group) to instantly become a national wireless player buying existing spectrum and with millions of customers.
Are there any un-conflicted investment banking firms left out there?