Mired in Regulatory Battle, Canadian Telcos Now Hit by Elections

(Bloomberg) -- Canadian telecom companies can’t catch a break. After having been embroiled in a battle with the nation’s regulator, they are now caught in the middle of federal elections.

As the campaign heats up, at least two parties have zeroed in on telcos as part of their pledge to save Canadians money. On Sunday, Prime Minister Justin Trudeau’s Liberal party pledged to cut wireless services costs by 25% within four years. Earlier this month, the New Democratic Party also indicated that if elected, it would implement price caps on mobile phone and internet services that would save families about C$10 ($7.53) per month.

“Wireless prices have already come down roughly 30% over the past three years - already exceeding the target the Liberals provided yesterday,” said Robert Ghiz, chief executive officer of Canadian Wireless Telecommunications Association. “As we enter a world of 5G it is critical that investment in network technology be encouraged. Our wireless networks are the backbone of the Canadian economy,” he said by email.

“The Liberal plan lays out specific steps, however we believe many of these steps are already in process,” said Scotiabank analyst Jeffrey Fan in a report published Monday. He added that the 25% proposed price reduction is based on outdated prices.

Examples provided in the Liberals document of 5 GB and 2 GB plans have already seen price cuts to C$65 and C$55 a month respectively, from C$87 and C$75, Fan said. “Since June, the incumbents have been offering C$75 unlimited at full speed up to 10 GB which is much more attractive than the examples the Liberals used in its document,” he said.

The Liberals plan:

Telcos were among the worst performing stocks Monday with Rogers Communications Inc. sliding as much as 2%. Telus Corp. fell 1.4%, while Shaw Communications Inc. dropped 1.2%. The S&P/TSX Communication Services Index is the biggest sector loser today with a 0.8% decline. The benchmark S&P/TSX Composite Index slipped 0.2%.

Federal regulators announced a decision in August to reduce wholesale broadband prices that telcos charge to third party internet providers in a bid to boost competition. Telcos including Rogers, Shaw, Cogeco and Quebecor’s Videotron said they expected a charge of anywhere from C$10 million to C$140 million as a result:

Earlier this month, six of the largest Canadian telcos appealed to a federal court to suspend the regulator’s order.

“It is possible that the federal election — which will be held on October 21 — might prompt companies to wait until the last minute before filing a formal complaint with the federal authorities, as the telcos are unlikely to want the spotlight on Internet pricing during the election campaign,” Desjardins analyst Maher Yagi said in a report published on Sept. 20, before the Liberals announcement.

--With assistance from Michael Bellusci.

To contact the reporter on this story: Divya Balji in Toronto at dbalji1@bloomberg.net

To contact the editors responsible for this story: Jacqueline Thorpe at jthorpe23@bloomberg.net, ;Madeleine Lim at mlim131@bloomberg.net, David Scanlan

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