Telus shows gumption – bank CEOs should take note

If Prime Minister Harper truly believes that it is up to the Competition Bureau – and only the Bureau – to opine on the wisdom of a Telus / BCE merger, then one has to ask the obvious question: how do you feel about Canada’s chartered banks (see prior post “BCE Takeover part 11“, June 20-07)?

If the question of politics doesn’t play into the post-acquisition Telus wireless division controlling 73% of the market in Alberta, 68% in Quebec, and 56% in Ontario (2005 CRTC data for a combined Bell Canada + Telus wireless entity, via Genuity Capital Markets), then my federal government can’t possibly worry about the politics if The Bank of Nova Scotia (BNS:TSX) and Bank of Montreal (BMO:TSX) get together. Their combined commercial loan business would have a market share of less than ~25%, for example. Residential mortgage concentration wouldn’t be any higher than that either, I suspect.

With BNS the most international of the Big 5 banks, and ~30% of BMO’s assets being based in Chicagoland, they are the two easy ones to mention in the same sentence. But by no means is it the only deal that could work.

While the regulatory environments are different for telecom and retail banking, the essence of the Competition Bureau’s tests shouldn’t be applied in any other manner. And, for the Prime Minister, it would be hard to argue that a Telus/Bell (Vancouver/Montreal HQ) deal has not a whit of politics to it, but that his Minister of Finance needs to have his ear to the ground when considering the topic of a bank merger.

Your basic cell phone bill is $30/month. A basic chequing account with ATM use and direct debit for bills costs less than $15/month. Which industry needs more competition, exactly?

After a wireless merger there’ll be few places to turn. After a BMO/BNS merger, for example, retail customers would still have RBC, CIBC, TD, ING, Laurentian, National, Desjardins, Pacific & Western, ATB, CWB, HSBC, and hundreds upon hundreds of credit unions and caisse populaires.

The same goes for a TD/CIBC merger instead of one involving BNS or BMO.

And then there are the U.S. banks. In the past few months alone, two U.S.-based global banks have approached our firm with offers of major credit facilities. Cold calls. I’m certain that we are not the only ones who’ve noticed that it is a competitive banking market in our nation.

The fact a Telus / BCE deal is likely stillborn doesn’t take away from the message the federal government has sent to Corporate Canada: “we have nothing to do with these issues”. Speak to the Bureau.

Which bank CEO will be the first to make the point publicly? Where are former RBC Chairman & CEO John Cleghorn and BMO Chairman & CEO Matt Barrett, O.C. when you need them?

MRM
(disclosure – I own BCE, BMO and BNS)