Casual commentary about political, cultural and economic issues with a particular interest on the city of Winnipeg by John Dobbin
Tuesday, May 3, 2016
MTS Sold To Bell Canada
MTS began in 1908 when the government bought up Bell operations in the province due to concerns over pricing of the product. As a Crown corporation, the utility eventually bought up all remaining telephone operations in Manitoba and was named Manitoba Telephone System in 1921. The service was the first to begin the 999 (later 911) emergency number in North America
From the 1950s to 2001, the head office for MTS was located on Empress across from Polo Park. It is now the Clarion Hotel and Original Pancake House. The head office located to the former Bank of Montreal regional headquarters on 333 Main Street where 1200 employees work at MTS Place. Total employees number 2,700.
MTS was at the forefront of innovation throughout the 1970s and 1980s with Telidon and Grassroots specializing in electronic services. The international services of MTS played a negative role in the 1988 provincial election when it was reported that MTX, a Saudi Arabian subsidiary lost $27 million. The NDP lost that election on a narrative of mismanaging into deficit several Crown corporations.
In the 1980s, MTS mobility and cellular services took off but both NDP and Progressive Conservatives pushed hard to extend MTS landlines across the province. Party lines still existed into the 1980s and 1990s and many communities pushed hard to get linked up. Despite warnings of the the cost and suggestions that cellular service might be the way to go with these communities, expansion went on pellmell till debt rose to hundreds of millions. Competition in long distance rates removed one area of unfettered profit. In five years, three of chief executives passed through the company.
By 1996 MTS had $800 million in debt and a need for $500 million to replace old equipment. All Canada was in the middle of a recession and revenue was drying up. In a controversial move, the Progressive Conservative government led by Gary Filmon privatized MTS. The new company was widely held at first but four years later 20% was held by Bell Canada and this led to $300 million of new investment. The new company went from Manitoba Telephone System to Manitoba Telecom Services. Nearly 40% of the workforce lost their jobs in the search for profitability.
The fast growing Internet saw MTS buy up a number of service providers including Escape Communications to become the dominant player in Manitoba. By 2003, the company became a majority force in every part of the telecom industry. They held 98% of local phones, 77% of long distance, 70% of cell phone service and 60% of Internet services. They also had a strong hand in security alarm systems. The next area they looked to enter big in was their innovative MTS TV which slowly began to expand in Winnipeg in 2003.
In a moment of triumph, MTS was awarded the naming rights to the new downtown arena in 2004 which in 2011 became home to the Winnipeg Jets.
The much fear privatization of MTS seemed to result in a strong private, independent and local company. Still, it was assumed by many this very strength also made it a takeover target by big players like Telus, Bell and Rogers. In 2004, MTS sought to forestall that by becoming more of a national player. They bought Allstream and their fiber optic system across Canada.
It soon became apparent that turning Allstream into the strong nation player MTS wanted was not in the cards. At every turn it seemed that entry to other areas of the Canadian market west or east would be expensive and not in the interest of the company. MTS faced major cellular competition but still retained 50% of the the market. In 2015, Allstream was sold and once again MTS became a takeover target.
It was announced this week that Bell will buy MTS for $3.6 billion. The details are sketchy still but the promise thus far is that Winnipeg will become the western headquarters for Bell and that hundreds of millions will be spent to upgrade infrastructure. To assuage the federal government in regards to competition, Bell has promised to sell Telus 1/3 of the combined company's wireless customers. Bell has said that their western operations will be headquartered in Winnipeg and cover 6,900 employees over four provinces and territories. It is unclear how many jobs will be in Winnipeg as there is likely to be a few added and a few lost.
Also unclear is how prices will be affected. Most critics suggest Winnipeg could see a rise of 40% in short order. It is also unclear how MTS TV will be affected as it moves to become Fibe TV. One thing that is clear is that it is the end of an era. It would be a shame to not ensure some guarantees on competition, jobs, investment and the headquarters.
Bell is a massive company that seems to go off the rails every 10 years to try and become a conglomerate and re-trenches with tail between its leg. The telecom user seems to suffer with price increases for their efforts. It is not wrong to ask how this deal will be good for Manitoba and the Canadian consumer.