Northwestel gains new American connections
Northwestel's parent company is now 20 per cent American-owned. But it's too soon to tell what this means for telecommunications in Nunavut.
MICHAELA RODRIGUE
Nunatsiaq News
IQALUIT — A multi-billion-dollar deal between two telephone North American telecommunications giants has left local phone company NorthwesTel Inc. with a new owner and some new American connections.
American telecommunications company Ameritech Corp. bought a 20 per cent stake in Bell Canada from its parent company BCE Inc. last week.
Local service provider NorthwesTel was 100 per cent owned by BCE. But it became part of the $5.1-billion deal when it was transferred over to Bell Canada. Ameritech also acquired a stake in BCE's five other regional Canadian telephone companies.
That means Ameritech now owns 20 per cent of NorthwesTel "indirectly," said Anne Grainger, director of public affairs for NorthwesTel in Whitehorse.
Despite the change in ownership, "For NorthwesTel and it's customers it's not a great deal of change. People won't notice any significant changes," Grainger said.
Ameritech has purchased a stake in a company that is in transition. Competition is scheduled to enter the northern long-distance market by July 2000.
To prepare itself, NorthwesTel has lowered long-distance charges in its western markets and at the same time hiked fees for local service. On August 1, residential and business local rates for all NorthwesTel customers will go up by $6.
As well, the Canadian Radio and Telecommunications Commission (CRTC) — the body that opened the doors to competition — must now decide whether to create a special fund to subsidize affordable local service.
The expected lower profits from long-distance service coupled with the high-cost of providing local service would seem to make NorthwesTel an unattractive acquisition.
But NorthwesTel and the five other regional telephone companies still represent a good business opportunity, explained one telecommunications analyst in Toronto.
"It's a cost-savings question," said Dvai Ghose an analyst with HCBC Securities Inc.
"They (Ameritech) can get efficiencies when buying capital equipment like switches, billing systems and fiber transmission. It's more to do with cost than revenue," Ghose said.
With Ameritech able to buy in bulk, all companies should eventually have lower capital and operating costs, he said.
NorthwesTel will also gain access to various Ameritech products.
But local residents say they're not holding their breath for telephone rates to come down.
"Who's to say. Nothing ever goes down," said Mike Hine, manager of mineral development at Qikiqtaaluk Corp.
"I hope it will get better," said Chris Cote, president of the Baffin Regional Chamber of Commerce, but he added: "It's a wait-and-see game."
Ameritech's 20-per-cent stake in Bell Canada won't include day-to-day control over NorthwesTel's operations, said Jean-Charles Robillard, associate director of corporate communications for BCE and Bell Canada.
"(NorthwesTel's) management is still Bell Canada. The deal was quite clear that it will be managed by Bell Canada. Ameritech won't have any direct say," Robillard said.
That combined with the CRTC's power over the telecommunications industry should protect residents local service.
"It's not going to be an issue for anyone, because a regulator will ensure that you have an affordable rate," Ghose said. "It's not economical to provide affordable service, but they have to."
The Ameritech and BCE boards of directors have both approved the deal but permission is still needed from the U.S. Department of Justice.
Meanwhile, Ameritech is in the midst of a merger with SBC Communications Inc. of San Antonio.