The big news on the M&A front these days are the talks of a Telus acquisition of Bell (‘Belus’ is the current street term I see being loosely coined during some discussions of the merger). The two Telco giants are among the largest operators of cellular service in Canada (Rogers is the largest of the three), an industry boasting an oligopoly of only a handful of Canadian players. Rogers is the only GSM service provider in the country, effectively a monopoly on its own (Microcell’s ‘Fido’ brand was acquired by Rogers in early 2005 for a little over $1 Billion).

So far, and this is my opinion only based on my assessment of public chatter, it seems that the majority of consumers are against this deal. One reason is the potential loss of jobs that will occur as a result of efficiencies achieved by the merger. The other reason, the one closest to heart, is the (further) reduction in competition that this deal will cause.

Canadians already pay the highest cellular fees in the developed world, according to a report released in March ’07 by the Seaboard Group. Average consumers in Canada pay about 33% more than American consumers. For business users, the difference is a whapping 150 percent! As a result, Canadians have the lowest adoption rate of cellular technologies. Just 56 per cent of Canadians have a mobile phone, compared with 75 per cent of Americans, 86 per cent of Germans.  

 “Canada is dead last in the 30-country OECD measurement of wireless penetration. Oddly enough, Canada’s wireless prices lead the world — there may well be a correlation,” the report says.

The report’s authors suggest that the government should allow and encourage outside competition in the industry. Foreign competition is currently prohibited in the Telco sector in Canada, as I briefly discussed in a previous post about Dubai buying into the US aviation sector.

At the Telcom Summit earlier this month, BCE, Telus, and Rogers had already been bullying smaller Canadian players by putting all their might behind restricting the upcoming ’airwaves auction’ to possibly prevent potential bidders from acquiring airspace for cellular services of competitive rates.

If the Competition Bureau of Canada approves this merger without creating an alternative avenue for competition, Canadian consumers can expect a similar impact to Telco rates as to that of transportation rates when Canadian Airlines folded and gave free reign of the skies to Air Canada.

Most disappointing of all, I was surprised to see the Liberal Industry Critic, Scott Brison (a Nova Scotian), supporting the incestuous Canadian merger over opening doors for healthy competition, whether local or foreign, that will ultimately benefit consumers.