The U.S. has seen a flurry of telecom merger activity in recent weeks, but Canada isn’t likely to see anything similar in the near future.
“There’s been a tremendous amount of consolidation in Canada already, so I’m not sure how much is left,” noted Mark Quigley, an analyst with the Yankee Group Canada in Ottawa.
The Canadian competitive local exchange carriers have either gone bankrupt, or have already been gobbled up by larger telcos. And Allstream, formerly AT&T Canada, was purchased by Manitoba Telecom Services last year.
The only remaining large consolidation candidate in the wireline market is Call-Net Enterprises, the company that operates Sprint Canada. But making a match with Sprint wouldn’t be simple.
“They have some assets that Telus, for instance, might value, but they also have stuff Telus wouldn’t want,” Quigley said. “Telus would probably like Sprint’s enterprise business, but they probably wouldn’t want the national residential play.”
Rogers Communications might be a contender to buy Sprint to kick-start its telephony efforts, noted Brian Sharwood.
The analyst with the Seaboard Group in Toronto added, “There are a whole lot of things to do with local phone service that Sprint has and Rogers could use….With the release of their local phone product coming, the ability to initially have a network that goes across Canada, so you can get long-distance at a cheap rate and a whole lot of talented call service agents…would be attractive.” But Rogers is already deeply in debt and might not be able to handle another big acquisition, Sharwood said.
The recent U.S. consolidation involved a proposed US$16 billion merger between SBC and AT&T and offers to buy MCI from both Verizon and Qwest. U.S. consolidation is being driven by the fact that in the past, U.S. telecom firms could provide either local or long-distance service, but not both.
Now that they are allowed to provide both, local phone companies like SBC and Verizon are looking to expand their long-distance operations by picking up LD specialists like AT&T and MCI.
Canadian companies never operated under the local/long-distance restrictions. The only gaps Canadian telecom firms are looking to fill are in niche areas like managed security and application development, Quigley believes.
“Telcos will be spending time acquiring competencies they don’t have,” he said. Canada’s enterprise telecom services market is in good shape Quigley believes, with customers able to choose from a bevy of providers, including Bell Canada, MTS/Allstream, Telus and integrators such as EDS and IBM who roll telecom services into their managed IT packages.
“The enterprise market is pretty vibrant and that’s the same in Vancouver as it is in Calgary or Toronto,” he said.
The biggest changes to the Canadian telecom market will likely come through regulatory rejigging rather than through consolidation. Last month the federal government revealed it will launch a review of the Canadian telecom sector that could result in changes to the Canadian Radio-tele