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The British are coming, the British are coming ! – It’s back Foreign ownership rules are changing

By April 18, 2012 General

On March 14th, the Honorable Christian Paradis, Minister of Industry, announced that the Harper Government will be taking action amend The Telecommunications Act to lift foreign investment restrictions for telecom companies that hold less than a 10-percent share of the total Canadian telecommunications market.

The link is here:

So, what will this mean? Is it business as usual?

The foreign ownership ruling has been in the works for quite a while now. The revised rules for foreign ownership will inevitably trigger a new series of acquisitions within Canada and those entering Canada. Everyone operating under 10 percent, (which at the moment is everyone but Bell, Rogers and TELUS) are ideal targets for US or International providers looking to establish a presence in Canada. For those close to this, it was also alleged to have been a top requested item for some of the dominant providers who themselves looked for means to raise additional capital outside of the small Canadian money markets.

Despite its size, Canada is a key market internationally and as we know houses many corporate head offices that operate internationally and also harbor many international offices here.

We have a prediction to share as a result of this? A series gut wrenching acquisitions.

What makes an acquisition gut wrenching?

If you look at history, and if history repeats, you will likely see the following:

  1. A welcome letter from your provider with two new logos (the new guy and the old company) telling you about the acquisition and how it is business as usual
  2. Another letter within 3 – 6 months thanking you for your business but in the spirit of strategic alignment the new company has chosen to cancel ‘some’ or ‘all’ of your services provided by them – giving you as little as 30 days to find a new provider for the impacted site or service
  3. A renewal call from your ‘new’ sales rep. indicating that your rates and proposed service levels and or coverage areas are no longer available at your previous rates and conditions
  4. A series of emails from your existing support team (sales rep. pre-sales engineer, Tier 1 support contacts indicating that they have been re-assigned or have been let go and your support team is no longer local or in Canada, but rather it is now located in the United States or Internationally)
  5. A call into tech support during your next outage when you realize that they have less than gracefully ‘merged’ their trouble and ticketing systems and no-longer have record of you, our staff, your support protocol and your history

So what is Frontier Networks’ view on this?

Of all that we do — VoiP, Unified Communications, Colocation, and Cloud. each individually represent the top acquisition demographics in the market today. The fact that we do them all (and all well) is pretty exciting and we have received quite a bit of attention as of late.

We did not come up with this strategy to be acquired; it just happens to be the top requested items from our clients. They are also items that we need for ourselves.

Frontier’s largest opportunity will not come from being acquired; it will come from remaining independent and still standing after the next round of acquisitions. There will be an ‘acquisition bubble’ that will create an inventory of really talented staff, and great potential customers who need a new home. We have seen this before, and all signs point to a repeat performance!

A final note….

There is an interesting trivia point on Frontier’s ownership structure. We are 100% Canadian owned – which historically allowed us to operate as we do as a carrier / broadband provider in Canada. But a little known fact is our shareholders are actual users of Frontier’s Services. Approximately 30% of Frontier’s revenues come from providing ‘shared services’ to our shareholders and companies owned by them.

So, I can safely say that our appetite to sell or be acquired is pretty low or non-existent. In 2003 we chose to create Frontier Networks as a way to secure better services, build better, more flexible networks, and at better rates, with knowledge that we would ‘take care of business’ for ourselves and our shareholders.

So the other 70% of our revenue can rest assured that we won’t go anywhere.