Telus discusses merger with AT&T

Journal News Services - 3/25/98

Edmonton - Hold the phone -- Canada's telecommunications industry appears headed for a shakeup that could launch "the mother of all price wars."

Edmonton-based Telus confirmed Tuesday it is in discussions with AT&T Canada "that could lead to a possible business combination." Neither Telus nor AT&T would elaborate.

Industry observers expect Telus to make a $1 billion bid for control of AT&T Canada, the Canadian affiliate of U.S. telecommunications giant AT&T. It is two-thirds owned by three Canadian banks after a 1996 bail out.

That would also usher in a new era of telecommunications service for Canadians by opening up competition within the Stentor group of companies, the alliance that provides telecommunications services to the majority of Canadians.

"A deal like this will blow up the whole set of working relationships that have been in place among the Stentor group of companies," said industry analyst Ian Angus.

"But I would say there is a good chance consumers could be in for the mother of all price wars because you can bet the Stentor people aren't going to sit by and let Telus take their business. The first thing they'll do is start selling loss-leader services to customers in Edmonton and Calgary."

Edmonton lawyer Jim Wachowich, who has represented the Alberta division of the Consumers Association of Canada at CRTC hearings, says the group isn't sure how consumers will fare if the deal goes through.

"Is it good or bad? It's hard to say. But if past experience shows anything, it's that corporate mergers are good for shareholders of the companies involved," Wachowich said.

The deal could leave Albertans with fewer choices, Wachowich said.

"For customers in Alberta, this merger could mean problems because the dominant market power in telecommunications is actually swallowing up a competitor."

The Stentor group, of which Telus has been an unhappy member, is made up of Canada's nine largest telephone companies, including Bell Canada.

Angus said the companies have a "gentleman's agreement" to share long distance business and refrain from poaching in each other's territories.

"But if this deal comes to pass, all bets will be off."

- Edmonton Journal