The Return of BELUS?

by Jordan Richardson on March 8, 2010

Ottawa’s proposal to relax foreign ownership rules in the telecommunications industry is raising some interesting possibilities in terms of mergers and collaborations. It is even raising possibilities that were once thought dead, like that of BELUS. BELUS, for the uninitiated, is the name several analysts came up with for a potential merger between Bell and Telus.

The idea for this merger has been in the works for years, but the foreign ownership changes could breathe new life into BELUS.

Cable consolidation is also on the radar with these proposed rule changes, which could mean merger possibilities between the likes of Shaw, Rogers and Cogeco.

These merger possibilities are being tossed around largely in response to news about the changing of foreign investment rules. Of course, these rule changes could mean that more competition in the telecommunications industry is inevitable and, as we know, nobody hates competition more than monopolies.

With companies like Globalive and Mobilicity entering the game armed with gobs of foreign capital, the stranglehold on Canada’s telecom markets once possessed by the Big Three could be threatened. And when corporations feel threatened, they either attack or band together to increase the potential for resistance.

The biggest threat to Canada’s Big Three comes in the decreasing of profitability, of course, so the solution to that is to expand market share as much as possible. If Telus and Bell do indeed band together, it will be to control a larger chunk of the markets.

With these rule changes, the telecommunications pie in Canada gets sliced up into smaller pieces. Now that new companies will be paying less for foreign capital, it can be easier to break into the once cozy industry and easier to set up shop to take on the Big Three. While it’s probably much too early to suggest that the dominance of those companies is over, these rule changes could represent a major challenge to their power over Canadian consumers.

The flip side is, of course, the cost of deregulation and the introduction of foreign investments into these sorts of Canadian companies. Some suggest that there may be a cultural cost to pay here as well, noting that the telecommunications industry in Canada overlaps with the broadcasting industry and that could mean more interference in that sector.

For now, it looks like the landscape of Canada’s telecommunications sector is set to change. There will be more players and more options for consumers, with the elusive BELUS once again a very real possibility. But the real costs to profitability and culture may not be evident until further down the line.

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