Uncommon Wisdom

Jun 15 2010   3:45PM GMT

Canada may lift foreign ownership rules to increase telecom ROI



Posted by: Tom Nolle
Tags:
Broadband
Canada telecom market
return on investment
ROI

Canada is considering lifting all restrictions on offshore ownership of its telecom and broadcast companies, a move that would presumably help an industry that’s struggling with low ROI and corresponding challenges in investor interest.

Three proposals are in play:

  • The first restricts foreign ownership on companies with more than 10% market share;
  • The second limits ownership to non-controlling interest;
  • And the third lifts all restrictions.

The averred purpose of the change is to improve competition, which in our view is a fancy way of saying the country will allow offshore interests that would be willing to enter a low ROI market. To us, the issue is clearly one of creating the kind of broadband the public wants at prices the public is willing to pay, and that means a low ROI in any market but one with a high demand density—which Canada certainly is not.

The U.S. also has ownership rules, as do many countries, and it will be interesting to see if this is a trend. So far, we’re getting indications that U.S. policy isn’t likely to change any time soon, but a Canadian example could provide some stimulus for change even here. The U.S. has the same ROI problem, for sure.

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