Canada’s telecoms may shed assets amid slow growth. What could they cut?
Bell said Northwestel, which provides phone, internet and television services in Canada’s north, would benefit from commitments by its new owner, known as Sixty North Unity, to double fibre internet speeds and expand high-speed availability.
When Bell Canada announced in June that it was selling Northwestel Inc. to a consortium of northern Indigenous communities, the company highlighted the $1-billion transaction as a significant step in promoting Indigenous self-determination.
Bell emphasized that Northwestel, which offers phone, internet, and television services across northern Canada, would benefit from its new owner, Sixty North Unity, which is committed to doubling fibre internet speeds and expanding high-speed access.
However, the sale also marked a strategic shift for Bell’s parent company, BCE Inc., which appeared to be focusing on "unlocking value from its business and monetizing standalone assets," according to CIBC analyst Stephanie Price in a recent research report.
Essentially, BCE was beginning to offload parts of the company that no longer fit within its broader business strategy.
As Canada’s telecom sector faces slower growth and increased competition, major players are expected to continue selling off assets to streamline operations and cut costs, industry experts suggest.
Price noted that Bell is not the only company adopting this approach. Rogers Communications Inc. has announced plans to sell nearly $1 billion in real estate, following the December 2023 sale of its stake in Cogeco for $829 million.
Analysts believe the Big 3 telecom companies—Rogers, BCE, and Telus Corp.—along with Quebecor Inc. and Cogeco, are in a position to explore a range of divestiture opportunities.
These telecom giants have vast business portfolios beyond their phone and internet services, including media, sports, entertainment, and health products.
"The Canadian telecom environment has become more competitive recently, with pricing wars leading to slower top-line growth and a focus on restructuring," Price wrote in her note. "In this environment, telecom providers are seeking efficiencies, with divestitures on the horizon as leverage remains elevated and interest rates fluctuate."
Dave Heger, senior equity analyst at Edward Jones, remarked that Canada’s telecom industry reached a "turning point" last year when Rogers completed its $26-billion acquisition of Shaw Communications Inc. As part of the deal, Shaw's Freedom Mobile was sold to Quebecor, intensifying competition in the wireless market.
As a result, large telecom companies have been experiencing slight declines in average revenue per user.
"The pricing side of things has gotten tougher in a four-player environment," Heger explained.
He added that telecom companies have accumulated debt over recent years to build out their 5G networks, promising faster speeds and more reliable connections. Meanwhile, BCE and Telus have been "aggressively" expanding their fibre internet networks across Canada.
However, the global rollout of 5G technology has not been as transformative as initially predicted, said Erik Bohlin, chair of telecommunication economics, policy, and regulation at the Ivey School of Business.
A decade ago, there were high expectations that 5G would be a major growth driver for telecom companies, Bohlin noted, particularly through Internet of Things applications and network slicing, which allows for the creation of multiple virtual networks to manage wireless traffic.
"5G is incrementally adding better capacity and latency, and perhaps supporting selective Internet of Things applications," Bohlin said. "But the expected growth has not materialized as anticipated."
