The Fraser Institute added its voice Monday to what has become a popular call for Ottawa to lift all restrictions on foreign ownership in the telecommunications sector. It’s a policy change that could be the perfect solution to the summer’s controversy over Verizon Communications Inc., if it weren’t for the small matter of Ottawa getting in its own way on foreign takeovers.
A report from the right-leaning think tank said eliminating all limits on foreign investment in telecom could be one part of a plan to foster “workable competition.”
But it could also create a situation where some, but not all, of Canada’s large carriers could realistically be sold.
George Cope, chief executive of the country’s largest telecommunications and media company BCE Inc. told a recent editorial board with the Financial Post that opening up investment restrictions would not result in a level playing field for BCE, since he doubts Ottawa would ever approve its sale to a foreigner.
“It would just never happen from a national security perspective,” he said. “No incumbent telco in the world will ever be owned, probably, outside its sovereign country.”
“I’m not against anything, I just think practically speaking it wouldn’t happen,” Mr. Cope said.
On the other hand, the leaders of Rogers Communications Inc. and particularly Telus Corp. have been more enthusiastic about the idea.
Telus CEO Darren Entwistle noted the two-year price plans his company has launched are similar to what Verizon offers in the U.S. market.
The big three have all lobbied this summer for the federal government to change the rules for the upcoming spectrum auction, arguing it favours a foreign giant like Verizon at the expense of Canadian players.
Failing a change to the auction rules, Rogers CEO Nadir Mohamed told Bloomberg News last Thursday he would rather have the market totally open “than flawed in terms of the structure that is currently in place.”
The federal government changed the rules last year to permit non-Canadians to acquire carriers with up to 10% of the telecom market share, which would allow a company like Verizon to buy startups like Wind Mobile or Mobilicity, but not take a run at one of the large national providers.
Darren Entwistle, chief executive of Telus Corp., which is the smallest of the big three telcos and has no broadcasting assets that could complicate a sale, has long called for foreign ownership liberalization, arguing that lifting restrictions would benefit Telus shareholders.
No incumbent telco in the world will ever be owned, probably, outside its sovereign country
“We don’t want to have any artificial regulations that fetter our access to international capital markets and the best defence to a Verizon — or an AT&T or a Deutsche Telekom — coming to Canada, is a fully valued stock price,” Mr. Entwistle told the Financial Post.
Industry Minister James Moore said in an interview last week further changes to foreign ownership rules are not a priority for the government.
In Monday’s report, senior Fraser Institute fellow Steven Globerman proposed Ottawa do away with all foreign ownership restrictions in the telecommunications sector and also scrap rules limiting non-Canadian ownership in the broadcast industry.
Mr. Globerman, a professor of international business at Western Washington University who has previously consulted for the CRTC and Industry Canada as well as BCE and Telus, said it would make Canada a more attractive destination for foreign-owned firms even outside the United States.
The threat of hostile takeovers could spur the incumbents to “use corporate resources efficiently,” he said, and foreign-owned firms would be unlikely to maintain co-operative relationships common between domestic firms.
But Mr. Cope’s comments raise the prospect of a theoretically wide open market in which Ottawa would still have the discretion to intervene and could feel compelled to use that power if the right nationalistic notes were hit.
That’s a scenario the resource sector knows well and the government has shown in the past it can look to the Investment Canada Act as a way out of deals it is not comfortable with.