Saskatchewan shows the telecoms industry the way forward?

The success of SaskTel has some advocating that Canada should break up the telecom oligopoly and create a nationally controlled industry.

Hello Flatlanders,

If the Rogers outage, which drove ATM and Interac services offline, taught me anything at all this past weekend, it is always have emergency cash tucked away.

But it also got me thinking about how SaskTel is the last remaining public telecoms provider.

Because of SaskTel, plans over 5GB of data are cheaper than anywhere else in Canada.

Rogers, Bell and Telus have mobile plans exclusive to Saskatchewan, often with twice as many features for about 40 per cent less than what is paid in other provinces, just so these companies can remain competitive with SaskTel, which controls more than 65 per cent of the provincial market.

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Despite the advantage to consumers, the Saskatchewan Party, under Brad Wall, toyed with the idea of selling SaskTel in 2017, after it passed Bill 40 that would allow the province to sell up to 49 per cent of a Saskatchewan Crown corporation without requiring a vote of support from the Saskatchewan people.

Meanwhile, the NDP used access to information laws to dig up evidence showing the Saskatchewan Party was corresponding to offers for SaskTel.

Despite the legislation saying such a sale didn’t need a vote, Wall said there would be a referendum regarding any sale of SaskTel.

There would be no referendum, however, because it was made clear by the public that selling SaskTel was not an option.

The Saskatchewan Urban Municipalities Association didn’t want the sale. Members of labour groups booed Deputy Premier Don Morgan at an event, and petitions and campaigns opposed the sale.

So the Saskatchewan Party withdrew the idea; Brad Wall would resign that summer; and Bill 40 would be repealed by the end of the year.


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Serving rural areas

SaskTel pays tens of millions of dollars in dividends into the provincial treasury and invests in rural infrastructure.

As of March 31, 2022, SaskTel’s wireless network includes more than 1,000 cell towers, over 700 of which are in rural areas. Meanwhile, Bell, Rogers, and Telus have limited their infrastructure spending to Regina and Saskatoon.

According to this Financial Post article, providing services to rural areas isn’t the most profitable for private companies.

Does SaskTel show the way forward for Canada’s telecom industry?

Last week, SaskTel released its annual report for the 2021-22 fiscal year, showing an income of $104.4 million and revenues of $1,300.9 million.

The success of SaskTel has some advocating that Canada should break up the telecom oligopoly and create a nationally controlled industry, as Uruguay has done, so profits can be invested in federal infrastructure, improving services for all, instead of going into shareholders’ pockets.

The benefits of privatization didn’t materialize in Manitoba

Manitoba Television System (MTS), a former crown corporation, was sold to private shareholders in 1996.

Over the years, MTS and SaskTel have had similar revenues, subscribers, types of services and number of employees relative to their populations. However, in 2014, the cost of basic home phone service in Manitoba was nine dollars higher than Saskatchewan.

And MTS paid their former CEO Pierre Blouin $7.8 million in total compensation. (His average compensation over a five-year period was $4.8 million, more than ten times what SaskTel’s CEO was paid over the same timeframe).

MTS’s directors were also paid more than ten times what SaskTel directors were paid.

As well, as of 2014, MTS had only paid income tax once in 10 years, so it wasn’t returning any money back to the public.

Privatizing MTS was once popular

When MTS was first privatized, the idea was popular amongst employees, because it was thought the move would fend off the big long distance providers, like Unitel and Sprint.

And the MTS union was happy that it wasn’t being sold to AT&T, Bell, or any other giant telecom.

Manitobans initially picked up about 70 per cent of MTS shares at $13 per share after the company privatized.

change of public opinion

Manitobans soured to privatization the following year as they faced two rate hikes and MTS eliminated 170 jobs. Those employees had to pay back company loans used to buy MTS shares.

In 1998, another 350 jobs were slashed at MTS, right on the heels of a record profit year for the company of $85 million.

Over a period of five years after privatizing, MTS would more than double its rates from $18.50 to $38.08.

Opposition leader at the time, Gary Doer said these measures were done to ensure MTS could pay dividends to its shareholders.

The annual report after its first year of privatization showed MTS President Bill Fraser received a $83,423 pay raise and a $93,900 bonus.

MTS argued that such pay raises were justified to retain talent and that there was pressure to offer the same return on investment to shareholders as they would receive in other phone companies.



Were voters duped?

Initially, then Premier Gary Filmon argued that MTS needed to privatize to pay off its debt and upgrade its equipment, and that it didn’t have the cash to make MTS a winning company.

It would later be revealed that the year before the company privatized it had made a $23 million profit.

Filmon would personally profit from privatizing MTS after he was appointed to its board shortly after he was defeated in the 1999 Manitoba election.

He would go on to collect more than $1.4 million in director fees and compensation over ten years, with hundreds of thousands worth in shares.

Bell reappears in Manitoba

In, 1999, Bell bought a 20 per cent interest in MTS, and Doer, who would go onto be premier that year, said it would only be a matter of time before Bell bought up MTS entirely.

And in 2017, Bell did indeed acquire all of MTS’ shares, which quickly resulted in price hikes. (MTS first went into operation in January 1908 after the Manitoba government bought Bell’s Manitoba operations).

Poor service

The recent wet weather this year caused widespread landline outages in Winnipeg, getting what is now Bell MTS in trouble with the CRTC. (I had similar problems with rain and my MTS landline when I lived in Winnipeg in 2012).

A warning for other public utilities?

The Canadian Centre for Policy Alternatives has said the stories of MTS and SaskTel are parables of privatization, and shows that the privatization of other public utilities could result in higher fees for consumers, lower service quality, much higher compensation for CEOs and executives, as well as higher corporate profits but lower returns for the provinces.

But regardless if a public utility is public or private, the Harvard Business Review says “accountability and consonance with the public’s interests should be the guiding lights.” 


Five stories from Manitoba you may have missed

  1. Manitoba driver caught speeding twice within minutes: RCMP
  2. Winnipeg has a shiny new plan to get to net-zero emissions.
  3. “I know I’ll be combining in November”: Manitoba farmers behind due to late spring
  4. Manitoba now has a laboratory officially recognized as a world leader in African swine fever.
  5. MPI requesting rate decrease for private vehicles, increase for motorcycles, commercial class

Five stories from Saskatchewan you may have missed

  1. Saskatchewan’s $4 billion irrigation plan explained. The largest infrastructure project in the province’s history could be a win for farming and potash mining, but a loss for the environment and First Nations.
  2. Sask. farms clean up after tornadoes touch down.
  3. Frank Young’s family speaks out about 5-year-old’s death, how he will be remembered
  4. Federal government puts up $10M for clean energy projects for Sask. First Nations
  5. COVID-19 viral loads up in 3 Sask. cities, showing signs of 7th wave

Photo of the week

The Big Muddy, Saskatchewan. PHOTO BY THOMAS BARTLETT.

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Thanks for reading, and kind regards,

Kelly-Anne Riess

Important work at a critical time.

Over the last 20 years, on the Prairies and beyond,  local newsrooms have shrunk, which means not much investigative journalism gets done in Saskatchewan and Manitoba. The Flatlander is changing this.

 

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