No dissent at MTS AGM

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This article was published 12/05/2016 (3675 days ago), so information in it may no longer be current.

Despite any grumblings of dissatisfaction or concern that might be heard on the street about the proposed $3.9-billion acquisition of MTS by BCE, there wasn’t a peep of that at MTS’s annual meeting in Winnipeg on Thursday.

One shareholder expressed concern about capital gains exposure as a result of the $40 price BCE has offered on MTS shares, which went public at $13 in 1997.

The proposed deal is one of the richest in the North American telecommunications sector — some say the richest — at 10.1 times the annual operating profit. So it’s no surprise shareholders would like that. But many of them are also proud of the company’s local roots, and apparently that is not an issue either.

As part of the deal, BCE said it will establish its western Canadian headquarters in Winnipeg, and the company has also committed to maintaining sponsorships and community engagement as well as spending $1 billion over the next five years to upgrade the Manitoba high-speed Internet infrastructure.

MTS board chairman David Leith said in addition to the board’s fiduciary responsibility to optimize value for shareholders — “When an unsolicited offer like this comes in, it is not discretionary as to whether you deal with it seriously” — he said the board spent a lot of time thinking about what would ensure the company’s continuing role as a fundamental part of the community even if the ownership is different.

“Relative to other transactions I have been involved in, this was a much greater component of the decision-making process than it’s been any other time I have seen,” said Leith, who is a member of several corporate boards and is the former deputy chairman of CIBC World Markets.

There will be intensive scrutiny of the deal by the Competition Bureau, the CRTC and Innovation, Science and Economic Development Canada that will mean it is not likely to close before the end of the year and maybe not until early 2017.

MTS chief executive officer Jay Forbes and others have been going out and talking about the deal, and he said he has not heard of any backlash from people worried about the loss of a community corporate asset or about potential fee increases.

For one thing, he said, the deal has been well-received by the investment community from the perspective of both organizations.

“That is certainly not always the case in these kinds of deals,” Forbes said.

He’s convinced of the sincerity of the BCE offer when it comes to the way the province will be treated, and MTS’s monitoring of feedback on social media leads them to believe it is being well-received on the street as well.

Among other, Forbes recently spoke with members of the Business Council of Manitoba.

“If I thought I would encounter any degree of friction or unease, it might have arisen in that forum,” Forbes said. “And it did not, quite the contrary.”

Business Council of Manitoba CEO Don Leitch said, “We are quite comfortable with what is happening.”

‘It’s not like they’re going to close the building and move to a 20-person entity in an industrial park somewhere’ — Don Leitch

He noted MTS is widely held, Bell used to be a large shareholder and there is a recognition significant investment is required to continue providing leading-edge service to Manitobans.

“It’s not like they’re going to close the building and move to a 20-person entity in an industrial park somewhere,” said Leitch. “And we recognize the marketplace at work. You’re not going to find the Business Council of Manitoba arguing against the marketplace.”

It is exactly the marketplace Gloria Desorcy is worried about, however.

The executive director of the Consumers Association of Canada (Manitoba) is concerned the reduction in the number of competitors in Manitoba will not be good for consumers.

“Any time you lose some competitors, you become concerned for rates,” Desorcy said. “Although we have enjoyed slightly lower rates historically in Manitoba and Saskatchewan, we believe our additional competition has been at least partly responsible for that.”

She said while economies of scale can enhance profits for the corporation, consumers may only benefit from that in the form of lower rates if there are competitors who “coerce” the company to pass those cost efficiencies on to consumers.

She’s also concerned about service quality in rural and northern communities, and she is not convinced a new owner of MTS will have a positive impact on that.

martin.cash@freepress.mb.ca