Tuesday, October 31, 2006

Canada's Telecom Income Trusts Derailed

I haven't been commenting much recently on the chess game going on between Telus and Bell about converting themselves into income trusts. This is a sexy investment vehicle, and to many, it just looks like a tax scheme designed to pass the burden from the carriers on to investors. That may be oversimplifying things, but there's a lot of truth to that. There's more going on of course, and I'm going to point you to two posts that have reported that latest news, and it's pretty significant.

In short, both Telus and Bell looked to be well on their way to making this happen, when late today, our Finance Minister issued a statement outlining a "Tax Fairness Plan" for Canada. In short, it looks like the federal government is going to overturn this process, meaning that Bell and Telus will not become income trusts and the status quo will remain.

This is a very interesting turn of events, and will undoubtedly drive our stock markets here in the morning. With this looking like a done deal for so long, the markets have already factored this into share prices, especially Telus. So, expect a bumpy ride for these two tomorrow. Trick or treat!

It's also very interesting to note that the strongest competitor after Bell and Telus is Rogers. Well, guess what? They're not talking about income trusts, and they just announced street-beating Q3 results today. Not only are their metrics great, but they've announced a 2:1 split and a 113% increase in their dividend. How's that for giving back? With performance like this, the Federal government has a pretty good precedent for saying that Bell and Telus are fine just the way they are. Talk about letting the air out of a balloon. This one isn't over, but it's a potent reminder that as powerful as Bell and Telus are, there are higher forces at work to keep them in check - rightly or wrongly.

Fellow bloggers Mark Evans and Mark Goldberg both have strong insights about these developments and I urge you to follow them for more detailed coverage. Great posts, guys.

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ipcom said...

Posted by: BlueBerry Pick'n

Where are our CIVIC minded Political Leaders? who cares about the work-a-day Canadian?

Perhaps we should examine the living cost of business in Canada.

We are a resource-based country, tied to the US... with an emerging relationship to the East.

But we siphon the INCOME from those resources into Toronto. Through HeadOffice, through Investment Banking, Private Banking &... TRUST FUNDS.

I live in Toronto, but I grew up a military brat. I travelled to region after region MIRED in poverty, poor education, acidified lakes, dead mountains, sterile fields & -YES!- toxic dumps opened near trailer parks.

Take a look at the cancer hot-zones in Eastern Canada.
Look at what CORPORATIONS do to unprotected peoples.

The CANADIAN people own our resources. The industry spin-off income & benefit should REMAIN primarily IN THE REGION whose resources are used.

They are finite. Perhaps, we should investigate the 'externalities' borne by industry & resource processing:
- worker injury
- ecological damage, both pollution & 'harvest'
- cultural impacts
- the WWF indicates that by the end of China's Rise (wasn't that a great Discovery Documentary?) with the demands of all EMERGING nations & current demand... we will require the equivalent of TWO GLOBES of resources.

Harper said it right: Canada is a resource & energy Super Power. We should remember resources are finite & start the DRIVE to sustainable economics.

Finance lives off the CREAM of transactions.

Canada will be a part of NASCO.

YET: we are ACTUALLY in discussions to OUTSOURCE our PORTS such as the 22 currently run in the US by a shell company.

Silk Route, Spice Trade, Petra: tell me that the Middle East was never a HUB of commerce & trade? nah, they've been at it for millennia.

but my point: if you're a TRADE & RESOURCE economy, is it WISE to let a FOREIGN country control your ports?

When THAT country's economy will be taking a post OilPeak dip?

what are OUR Ethics on the DOWNSIDE of the Oil Peak?


we're being had, luv. & the guys with their hands on the purse strings are making grotesque PROFIT by insulating themselves from Responsibility to their communities.

Maybe retired teachers shouldn't HAVE to scramble & dip their investments into dirty counter-civic puddles.

maybe we should just crop the PORK from the transactions & have a government who supports the individuals of the country in which they live?

what happens to countries in the HONOURLESS world economy & business model? Look at the US economy. Look at the CURRENT distress of the Gulf Coast.

my god: look at Cote d'Ivoire (I think the only reaons it doesn't get more press? few countries have BILINGUAL names... Ivory Coast got SCREWED.)

Spread Love...
...but wear the Glove!

BlueBerry Pick'n
can be found @
�Silent Freedom is Freedom Silenced�

ipcom said...

Posted by: jon arnold

Thanks for your reply, "This Canadian". I appreciate your passion and pride in things Canadian! I'd engage you further, but this isn't a forum for geopolitics - maybe we need another blog for that. :-)