What if Bell and Telus merge?

As many of you know, over the past few weeks, there has been much speculation and many articles written on possible mergers and buyouts of BCE. We at Fox Group are not telecommunications-industry financial analysts. Rather we are technology-focused industry analysts who try to bring customer perspective and view to the happenings in the telecom and IT industry.

We have been tracking these discussions, and we believe there has been little or no discussions let alone consideration on the potential impact for customers of any of the choices discussed.

It amazes us that in this age of ‘customer centric’ business and ‘one to one marketing’, that investors and senior executives don’t appear to be considering the impact of their actions on their customers.

As most of the Fox Flash readers are aware, the telecommunications industry has been, and continues to be, a capital-intensive industry. It requires ongoing access to large amounts of capital to continually upgrade, replace, improve and invest in its network infrastructures.

Even with the decreasing cost of converged network solutions – or moving to hosted, applications-type network services – it still requires a lot of capital to keep up the development of next-generation network products, services and solutions.

In addition, the foreign ownership restrictions have hindered, and will continue to hinder, the telecom industry from effectively obtaining funding from various Canadian sources. We will not dwell on the foreign investment challenges here, and leave that for a future Fox Flash article. We encourage our fellow telecom industry analysts, like Mark Goldberg, to comment on that challenge. http://www.mhgoldberg.com/blog/

Potential negative impact on customers

As a former enterprise network and telecom manager, I have always been of the view that carrier diversity is a good thing. It is good for us as customers because each supplier is always trying to gain more of our wallets and become ‘sole source’.

If consolidation of Bell and Telus was to occur, we would be concerned about the long-term service effects and the potential attitude of complacency post consolidation may cause.

In the consolidated scenario, we believe there might well be either a slowing down or a reduction in the number of new products and services coming to market. Given the traditional two to three year lag between Canada and the US in product rollouts, particularly related to innovative, next-generation network technologies, we’re concerned about the potential affects that the Canadian customer could be subjected to.

Lastly, when large corporations combine, there is always a reduction of headcount. This can affect sales, service, and marketing and even research organizations. Consolidation is also a distracting activity for both corporations before and after the fact. This means that both companies would be ‘taking their eyes off the future’ during the consolidation period which can range from one to three years.

Our concern regarding the human effect, as customers, is also that corporate ‘knowledge’ will go out the window, and that would affect customer service and sales performance.

Potential positive impact on customers

The challenge for Canada has always been to provide cost-effective, innovative services throughout all parts of Canada , in spite of our geography and population.

Perhaps a consolidated, combined company, would have better access to capital, and be able to take the best attributes of each company, and leave behind the challenges and weaknesses of each….something like ‘the sum is greater than the parts’.

Summary

As one of the enterprise customers and former Vice-Chair of Telecom Policy who participated in the competition hearings in the 1990’s through the former Canadian Business Telecommunications Alliance (CBTA), I believe Canada continues to need to have a strong, viable, sustainable competitive telecommunications industry.

We hope that the government, investment bankers, financial analysts, senior executives and particularly the major shareholders consider all of the factors thoroughly to ensure the best decision for all, and particularly for us as customers.

As always, Roberta welcomes your thoughts and feedback. Feel free to contact her at editor@foxgroup.ca or 1.866.FOX.GROUP (369.4768).

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Jim Love, Chief Content Officer, IT World Canada

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