If you’re in Canada and have a fleeting interest in business, technology, finance and/or all of the above, you will be somewhat familiar with the proposed $52bn (CDN) purchase of BCE Inc by a constortium led by the Ontario Teachers Pension Plan (OTPP).
Some background for non-Canadian readers:
BCE is one of the “big three” telecom providers in Canada, the other two being Rogers and Telus. The OTPP is a major investor in Canada and already has a controlling stake in Maple Leaf Sports and Entertainment, the company that runs Toronto FC, the Raptors and Toronto’s least successful team, the Maple Leafs.
Why this is important:
$52bn of investment.
To take a telecom giant, and oligarchy member private.
To refocus on long-term strategy, not quarter by quarter numbers (not, I hope, on flipping the company for billions more once the regulations around Canadian owned companies are *ahem* relaxed).
To refocus on growing, profitable areas (this is very important).
What this means:
According to an interview with Michael Sabia, BCE’s CEO, in the National Post, BCE’s growth businesses now represent the majority of its revenues, and its growth businesses are now getting to a level of profitability where they can contribute more EBITDA [earnings before interest, taxes, depreciation and amortization] growth than its traditional businesses are losing in a given year.
According to another article I read, but can’t find, mobile phone penetration in Canada sits at just 60 per cent. This leaves a little bit of room before it realises the levels that Luxemborg or Hong Kong enojy – both at more than 100 per cent.
So, from where I’m sitting, this looks to me like a $52bn gamble on the rapid growth of the mobile market.
[Mark Evans has his usually insightful look ahead at BCE's future]
The perfect storm
Why do I think this? Well three things:
Canada is already seeing the same advancements in mobile technology / societal penetration as the U.K. did a few years ago – there’s no reason to suggest Canada won’t catch up with the U.K. which is one of the most advanced mobile societies.
The recent furore around the iPhone suggests the handset market, which essentially drives the subscription market is far from sterile. Check out this amusing story from NYC, via Scotty Mac, on just how potent the iPhone can be. (What would you have asked for?)
Mobile is a hot, steamy and downright sexy business to be in right now. Just ask the world’s richest man. Not Bill Gates, a Mexican Mobile Mogul called Carlos Slim, now worth some $67bn (U.S.) – more than enough to buy BCE himself…