Growing competition in the market, falling revenues prompted Bruce Telecom sale

Section: 
News

By Barb McKay

 

Decisions made by the Canadian Radio-television Telecommunications Commission (CRTC) to open the region up to competition ultimately led to the decision to sell Bruce Telecom to Eastlink, according to Kincardine’s mayor.

 

Larry Kraemer stated during last week’s council meeting that Bruce Telecom had been hit with significant challenges in the last couple of years that resulted in revenue losses.

 

In January, the CRTC ruled to allow Rogers Communications to offer wireless number portability to customers in Kincardine, Tiverton and Paisley, allowing customers to keep their same phone number when they switch service providers.

 

“There’s a loss of landlines because people are switching to cell phones,” Kraemer said.

 

Previous to that, the CRTC ruled that fees would no longer have to be paid for the co-location of services. That meant that Bell Canada would not have to pay Bruce Telecom for the use of its lines to service customers. Kraemer said that one decision resulted in an annual revenue loss of $600,000 to $700,000. Bruce Telecom took another hit when the subsidy it receives as a rural telecom was cut from approximately half a million dollars to roughly $200,000 per year.

 

All of these factors impact the value of the company, Kraemer explained to The Independent Thursday. Companies are given value based on their earnings before interest, depreciation and amortization (EBIDA). Kraemer said the figure is an industry number that typically ranges from four to eight, and is based on things like the number of customers served, the type of service offerings, as well as labour agreements. Bruce Telecom’s number is 6.5.

 

“That means when we lose $1 million in revenue we lose $6.5 million of value,” Kraemer said. “People have to understand what was being faced. Being up against the big guys with these types of things going on makes it very difficult to stand toe to toe with them.”

 

The municipality was challenged on its decision to sell Bruce Telecom last Wednesday by resident Christina Wahi, who came to council to air her grievance. She said the public should have had input in the decision to sell.

 

“Council states that had a public process taken place, the market value of Bruce Telecom would have been negatively impacted,” she said. “What studies were done by council to support this statement and what was the projected decline in dollar value?”

Wahi questioned the municipality, if it could not run a telecom profitably, how could it hope to run a natural gas company?

Deputy mayor Anne Eadie said the decision to sell Bruce Telecom was a very difficult one.

“We definitely looked at every angle,” she said. “The easy way out would have been to pass it on to the next council and avoid it, but we are responsible to our constituents.

“As far as natural gas goes, that’s a whole other topic. We only looked at Bruce Telecom and made the decision solely on that business.”

Councillor Maureen Couture said she could understand Wahi’s and others’ surprise and shock by the sale.

“We believe we are doing the right thing for the future of the municipality,” she said. “We are selling a great company, not a losing proposition, that is why we garnered the price we did.”

“The temptation was to keep it, but the fear was having to raise taxes to make up for the $800,000 we’d be losing year after year, that we could see coming,” said councillor Ron Coristine.

Councillor Randy Roppel said people feel betrayed because they didn’t have the opportunity to have a say.

“It’s poor communication that’s being felt here,” he said.

“I hope that once the sale goes through that there can be more information released so this is more understanding,” said councillor Jacqueline Faubert.