Tories to ease telecom foreign control rules: analysts

A Conservative majority government will likely mean more foreign ownership in Canada's telecom industry, fostering competition that will ultimately benefit consumers, analysts say.
Tony Clement, shown in November, had already announced consultations on foreign ownership while serving as industry minister in the last government. (The Canadian Press)

A Conservative majority government will likely mean more foreign ownership in Canada's telecom industry, fostering competition that will ultimately benefit consumers, analysts say.

"With the Conservatives taking a majority in Parliament, we believe they can now push for relaxation of telecom foreign ownership restriction without support from opposition parties," UBS analyst Phillip Huang said Tuesday, adding he expects legislation to be in place by the end of this year.

That means telecom companies like U.S.-based AT&T, France Telecom, Germany's T-Mobile, Japanese telecom giant NTT or Mexico's America Movil potentially could be allowed to set up shop in Canada. 

The Conservatives had wanted to loosen foreign ownership rules last year but were unable to go ahead with their plans when they were a minority government. 

Huang said he continues to believe foreign players, such as America Movil, may consider entering Canada. Relaxed rules could open up some big opportunities — Manitoba Telecom, for example, could end up selling its Allstream Internet business unit if rules are relaxed.

But any relaxed ownership restrictions put in place by the Tory government will more likely open room for telecom operators with less than 10 per cent market share and would provide them with better access to capital, Huang said in a research note.

That would affect newer wireless players currently offering mobile phone services such as Wind Mobile, Mobilicity and Public Mobile.

Discussion still required

Telecom analyst Mark Goldberg said although the Tories haven't laid out their strategy, the move is to keep the industry competitive.

"Some discussion still needs to be had on how you liberalize the rules in a way that brings the most benefit to consumers," said Goldberg of Toronto-area Mark Goldberg & Associates.

If the Conservative government decides to relax restrictions for telecom players with 10 per cent market share, it's not just doing it for the "under dogs," he said. 

"This isn't simply helping foreign ownership for Wind and Mobilicity and Public Mobile," Goldberg said.

"It's allowing AT&T, T-Mobile, France Telecom, NTT from Japan — all of these companies from around the world to enter Canada with access to global financial markets, but tying the hands behind the back for people who are among Canada's biggest employers," he said.

It would have to be taken into account how relaxing foreign ownership rules would affect Rogers, Bell and Telus, Goldberg said.

Industry Minister Tony Clement has already announced consultations on foreign ownership, outlining three options — removing all restrictions; increasing the limit of foreign investment from the current 20 to 49 per cent, and/or lifting restrictions for carriers with less than 10 per cent market share.

Timing unclear

Wind Mobile chairman Anthony Lacavera said he ultimately favours no restrictions on foreign ownership for telecom companies, but believes the federal government should start with relaxed rules for those with less than 10 per cent market share.

New wireless players have a challenge raising money because of their market share and the time it takes for them to become profitable, he said from Toronto.

"It's much easier for the big guys to raise capital."

Lacavera said he would have no problem with foreign competitors such as AT&T coming into Canada again.

"I think that would just be great news for Canadian consumers," he said, adding it would keep prices competitive. 

TD Waterhouse equity portfolio manager Cynthia Caskey said the odds are high the Conservatives will eliminate foreign ownership rules but said the timing isn't yet clear. 

"There's no question in our mind that new wireless entrants would have better funding options and there could be other foreign telecom carriers that could seek to enter the market," said Caskey.