Canada's two largest telecommunications companies could soon merge into one, if Vancouver-based Telus Corp. succeeds in its bid to purchase Montreal-based BCE Inc.
The combined market value of the two rival companies is more than $50 billion. Telus CEO Darren Entwistle trumpeted the potential deal as an "all-Canadian solution," that would create a "vibrant player" in an "increasingly competitive industry."
But Michael Janigan, a consumer advocate, warned that average Canadians could lose out.
"I don't think it's good for consumers," he told Â鶹´«Ã½. "And I think it's a direct result of the government interfering in the regulatory process earlier this year, to lower the bar for regulation and remove most of the consumer protection associated with local telephone service."
BCE -- the Montreal-based Bell Canada parent company -- has said the two companies have entered into a non-disclosure and standstill agreement.
BCE is currently the dominant player in Central Canada while Telus Corp. leads the industry in Western Canada. Together the companies would form a powerful force.
Telus vice president Janet Yale said the merger would benefit consumers.
"First of all, the combined strength of a merged entity can't be underestimated in terms of the combined scale and the financial strength to continue to invest," she said.
Canada already has the cheapest rates for residential, business and mobile phone service among G7 countries. But Internet use is quickly changing the industry.
When it comes to the cost of high-speed Internet, Canada remains less expensive than the United States. And Canada also leads in the amount of per-capita use of high-speed Internet accounts, according to an Organization for Economic Co-operation and Development report from 2005.
An increasing number of Canadians are now making phone calls over the Internet, bypassing traditional phone companies like Bell or Telus.
"The high-speed Internet is absolutely causing huge problems for the traditional cash cow of long-distance (phone calls)," said analyst Karl Moore of McGill University.
Meanwhile, the Canada Pension Plan Investment Board, the Ontario Teachers Pension Plan Board and U.S. private equity firm Cerberus Capital Management are also among those interested in purchasing BCE.
The company has reportedly asked the three groups to submit offers before the Canada Day weekend.
Telus has touted the possible deal as a solution that would help BCE continue as a global leader while protecting a Canadian enterprise.
"Telus believes the combination of the two businesses would represent a compelling strategic and financial opportunity for all BCE and Telus stakeholders," Entwistle said in a press release.
Telus confirmed earlier this year it was reviewing options to boost the value of its shares, including a possible sale or merger.
BCE said Wednesday night it is in talks with Telus to "explore the possibility of a business combination."
Last week, federal Industry Minister Maxime Bernier acknowledged the government is aware of the fierce debate around whether Canada's mobile market lacks competition as industry players exchanged barbs over whether the country's main mobile companies -- BCE, Telus and Rogers Communications Inc. -- have already become too dominant.
Recent reports have suggested that Telus was unlikely to take part in the bidding unless Ottawa signalled that it would not block the merger.
With a report by CTV's David Akin and files from The Canadian Press
