Ma Bell's Canadian cousin is also dialing a big spinoff

Both sides of the US-Canada border are witnessing breakups of their nationwide telephone companies this year. While American Telephone & Telegraph Company (AT&T) is spinning off its local operating divisions and other segments of its business, following an agreement with the US Justice Department, Bell Canada is seeking to break up its corporate empire, taking its high-technology business out of the hands of government regulators in Ottawa. In this case, however, the Canadian government does not want to let go.

There have been some comparisons with the AT&T breakup in the United States, but the two situations are not quite the same. In Canada, the long-distance network is owned by the Trans Canada Telephone System, which is an association of all telephone companies in the country.

''This reorganization is totally independent of the AT&T decision,'' says the chairman of Bell Canada, Jean de Grandpre. ''It's not the same situation in Canada. We are dealing with two different types of problems.''

For Bell Canada, Canada's largest telephone company and biggest telecommunications conglomerate, the purpose of the change is similar to that of AT&T: to take some of its moneymaking operations - especially its high-technology operations expected to be the source of future growth - out of the jurisdiction of the federal regulators, in this case, the Canadian Radio and Television Commission. CRTC licenses television and radio stations and scrutinizes Bell Canada as a utility with a monopoly to provide phone services.

The regulated operations would be part of a company that falls under government oversight - a subsidiary of a new holding company to be called Bell Canada Enterprises Inc. (BCE).

Francis McInerny, president of Northern Business Information Ltd., an independent company that does research in telecommunications, describes the reorganization as ''something Bell should have done 10 years ago. It will take Bell out of the control of regulators.'' Mr. McInerny adds that Bell Canada is now headed by people who are overly concerned with the company's utility status. He would like to see BCE ''put the emphasis on marketing, retail sales, and high technology.'' Northern Telecom is the core of Bell Canada's empire, he adds.

Consumer groups, however, are afraid the reorganization and loss of government regulation could lead to higher phone rates.

Still, Bell Canada has successfully defended the reorganization against an antitrust investigation as well as a court case in Quebec. It now faces a ruling by the CRTC which may take some months. Bell Canada's shareholders, however, have overwhelmingly approved the corporate restructuring.

In a similar case, the former Canadian Pacific Railway is now Canadian Pacific Ltd., and operates as a holding company with the regulated railway as part of the profitable whole. It managed to get its subsidiaries out from under the probing eyes of regulators.

Although the Bell Canada deal is only a paper transfer, with no cash being paid for its assets, its total value, in associated and subsidiary companies, would come to about $460 million (Can.).

Under its current corporate structure, Bell Canada owns Bell Canada Enterprise (not to be confused with the new holding company); parts of some provincially regulated telephone companies; Bell Canada International Management , Research, and Consulting, which among other things has a huge contract to provide telephone service in Saudi Arabia; ownership of 24.6 percent of Telesat Canada, a satellite consortium; 55.2 percent of Northern Telecom, the second-largest manufacturer of telecommunications equipment in North America; and 30 percent of Bell Northern Research.

Northern Telecom owns the remaining 70 percent of Bell Northern Research. Bell Canada also owns Tele Direct (Canada), Tele Direct (Publications Inc.), which publish the Yellow Pages telephone books, and Bell Communications Systems Inc.

Under the new organization, if the proper government and judicial approval is attained, the new Bell Canada Enterprises would own all of Bell Canada. It would own 55.2 percent of Northern Telecom. And it would own shares in the provincially regulated telephone companies; it would own Tele Direct Canada, Bell Communications Systems, and Bell Canada International Management, Research, and Consulting. Bell Canada, a government-regulated utility, would also keep the 24.6 percent interest in Telesat Canada.

Bell Canada would continue to own 30 percent of Bell Northern Research, the company that provides it and Northern Telecom with new research ideas. Northern Telecom would own the remaining 70 percent.

All this would leave Bell Canada Enterprise with the high-tech and moneymaking sections of the corporation. Bell Canada would be a pure, regulated utility and its telephone rates would be based on the utility's profitability, not on money in Saudi Arabia or by Northern Telecom.

Bell Canada provides telephone service in Ontario and Quebec, the two provinces in the industrial center of the country, with more than half the population. Bell also provides service in Newfoundland and the Northwest Territories. In addition, it owns shares in telephone companies in New Brunswick and Nova Scotia. The three prairie provinces have telephone services owned by the provincial governments, and British Columbia Telephone is publicly owned but independent of Bell Canada.

As a corporation, Bell Canada had profits in 1981 of $559 million (Can.). The company has assets of $12.45 billion. The reorganization makes good sense, one former Bell Canada executive said. ''It makes it cleaner and easier to go for rate increases.''

You've read  of  free articles. Subscribe to continue.
QR Code to Ma Bell's Canadian cousin is also dialing a big spinoff
Read this article in
QR Code to Subscription page
Start your subscription today