If you鈥檝e ever listened to AM radio in Saskatchewan, you鈥檝e heard an ad for an upcoming auction sale. And that ad almost certainly started with the opening strains of Auctioneer by Leroy Van Dyke.
鈥淗ey well alright sir here we go there
鈥淎nd what are ya' gonna give for 'em?鈥�
It turns out Premier Brad Wall, a former radio host, must have been a fan, because that鈥檚 essentially how he came out of the Aug. 22 cabinet shuffle. The item up for bid? SaskTel.
While he鈥檚 been somewhat coy about selling SaskTel, Wall鈥檚 actions are pretty clear.
He appointed a new minister responsible for SaskTel, nothing new, but then said that minister would deal with this issue, should an offer come in.
Wall strongly implied a price 鈥� enough to pay off the province鈥檚 operating debt, which would be around $4 billion. And he said a referendum would be needed to get the permission of the owners, the people of Saskatchewan.
My dad鈥檚 something of an auctioneer, and I grew up listening to him sing Van Dyke鈥檚 Auctioneer. To me and pretty much everyone with two brain cells, it was clear SaskTel is now up for bid. I鈥檓 certain that鈥檚 how the boardrooms of Telus and Bell, and perhaps Rogers, are taking it. They鈥檙e likely lining up their financing now.
The premise sounds enticing: paying off the provincial debt in one fell swoop. Poof! Gone! Call me Ralph!
Saskatchewan鈥檚 2017 budget forecasts $297.2 million in debt payments. At the same time, the Crown corporation鈥檚 2015-16 annual report noted,鈥� During the last five fiscal years, SaskTel paid a total of $403.4 million in dividends while maintaining a debt ratio within industry standards.鈥�
In other words, it took several years in dividends from SaskTel to make up one year of provincial debt payments. In Wall鈥檚 words, 鈥淏y eliminating the debt, Saskatchewan would save roughly twice the amount in interest payments each year as what SaskTel currently averages in an annual dividend to government/shareholders.鈥�
Many talking heads have pointed out that SaskTel is likely a declining asset. It鈥檚 now a very small fish in a very big pond, the only remaining government-owned telecommunications company of its type on the continent. It鈥檚 obvious competition in wireless is going to continue to chew away at the edges of its business. Just ask your friends and family how many have a Telus cellphone.
So the idea is, sell it now while you can, cash out, pay down debt, and we鈥檙e all the better for it.
Well, maybe. But maybe not.
A friend on Facebook pointed out the differences in rates on Rogers, showing the same plans for Alberta customers of Rogers and Saskatchewan. I checked it out for myself and went a few steps further.
For the same high usage 15 gigabyte plan (similar to what I have), in Saskatchewan it鈥檚 $85. Manitoba is $95. British Columbia, Alberta, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador are all $165 per month. Quebec, to be different, doesn鈥檛 have a 15 GB plan, but does have a 14 GB for $110.
What is the difference? Manitoba Telecom Services鈥� sale to Bell has not yet been finalized, and SaskTel is still independent.
I really, really like the idea of paying off the debt. But there鈥檚 one problem with the concept 鈥� it鈥檚 likely not gone forever.
Look at what happened in Alberta 鈥� the debt got paid off, and then governments started spending profligately. Even before the crash in oil prices, Alberta was running up big deficits again. When the crash hit, those deficits built up to in excess of $10 billion for this year.
Saskatchewan is also looking at a $675 million deficit. So if we sell off SaskTel now, pay off the debt and things don鈥檛 turn around in the resource sector, will we have another $600 million debt next year? Will elimination of interest payments reduce that deficit to $300 million, and then further cutbacks take care of the rest?
Fundamentally, will we live within our means once the mortgage is paid and there are no more juicy assets to sell off?
Also, if some company is willing to pay $4 billion or more for SaskTel, that means they think they can extract at least that much from SaskTel customers in the coming years to make the investment worthwhile. Four billion divided by 1.4 million customer connections SaskTel鈥檚 annual report refers to and you get $2,857 per connection. That is the bare minimum, on average, the buyer is going to have to get to make their money back. And that鈥檚 coming out of pocket of you, the customer, one way or another.
So yeah, we might pay off the province鈥檚 debt, except we鈥檒l be doing it through our phone bills instead of PST, income tax or booze tax on a case of Pil.
鈥� Brian Zinchuk is editor of Pipeline News. He can be reached at [email protected].
