Canada Should Drop Foreign-Ownership Rules on Telecoms, Says Telus CEO

Darren Entwistle, President and CEO of Telus, wants Ottawa to relax foreign-ownership rules for large telecommunications companies — reports The Globe and Mail.

Entwistle has asked the same of the federal government in the past, but he is now renewing his argument as the Canadian telecom scene goes through a new wave of consolidation with Rogers’s proposed $26 billion acquisition of Shaw Communications, the $2.85 billion sale of Freedom Mobile to Quebecor, and the Bell-Distributel merger.

As Canada’s larger telecoms continue to gobble up their rivals, Entwistle believes foreign ownership could be the key to maintaining a competitive landscape.

“I’m a big believer that we shouldn’t have foreign-ownership restrictions,” Entwistle said in a recent interview with The Globe and Mail’s Alexandra Posadzki and Andrew Willis.

“The best protection shouldn’t be artificial regulation. The best protection should be a fully valued stock price.”

Independent telecom operator TekSavvy’s Vice President of Insight & Engagement, Peter Nowak, isn’t convinced, however.

Back in 2012, Ottawa made legislative changes that allowed up to 100% ownership of smaller telecoms with a revenue market share of 10% or less. However, larger telecoms like the Big Three (Rogers, Bell, and Telus) weren’t afforded this luxury.

Currently, direct and indirect foreign investment in telecom companies with more than 10% revenue market share is currently capped at a combined 46.7%. In addition, these companies are also required to populate 80% of their board seats with Canadian citizens. Entwistle wants Ottawa to lift these restrictions.

“When you have artificial regulation, it fetters your fluid access to international capital markets. I don’t want to do that; I want to get the cheapest money available,” Mr. Entwistle said.

“When we’re blowing our brains on fibre and 5G, I want to make sure that we get money at the lowest cost possible along the way.”

The telecom industry thrives on economies of scale. According to Entwistle, deep-pocketed foreign investors could be key to establishing these economies and ensuring they flourish.

“My only ask on dropping foreign-ownership restrictions is a level playing field,” Entwistle added. “Verizon doesn’t need any help from the Canadian government – just have a level playing field. So, if you’re running a spectrum auction, have an open auction.”

If competition is Ottawa’s goal, Entwistle said it would be best to bring outside players into the fray.

The last time there was a threat of U.S.-based Verizon coming to Canada, the collective incumbents were scared and used targeted ad campaigns to fight any threat of a larger foreign player entering the wireless space.

What do you think of Telus’s proposed changes? Let us know in the comments below.