» Private Equity Buyout of Bell Canada Good for Economy, Says Finance MinisterTelecommunications Industry News

Telecom News Editorials Reports Glossary

Private Equity Buyout of Bell Canada Good for Economy, Says Finance Minister

7:10 am on July 4, 2007 | Category: Business, Corporate, Regulation, Telecom Services, Telephone

The proposed $51.7-billion buyout of Canada’s largest telecom provider, BCE Inc., is good news for the country’s economy, says Finance Minister, Jim Flaherty, so long as the new prospective owners follow through on promises to invest billions in R&D and infrastructure upgrades.

“The key in industries such as telecommunications is that the entity has the ability to invest in innovation, and research and development. And that requires substantial amounts of capital. And from what I hear, that is likely to happen to Bell Canada. And that is good for Canada,” Mr. Flaherty commented in an interview yesterday.

Flaherty says that he is comfortable with the role that private equity and pension funds are playing in the Canadian economy, and doesn’t see any reason for Ottawa to review leveraged buyout rules, or the tax-exempt status of pension funds, several of which competed to acquire BCE in recent weeks.

The federal government is expected to lose over $1-billion in annual tax revenue if the Bell Canada buyout is approved by shareholders, but stands to reap a massive one-time windfall through capital gains taxes.

The proposed buyout will involve the Ontario Teachers Pension Plan taking a 52% share in BCE. American private investment firms, Providence Equity Partners and Madison Dearborn Partners, will hold 32% and 9% of the company, respectively, while the remaining 7% will be owned by minor Canadian investors.

Telecommunications Industry News