Operators are pushing back against CRTC decisions that gave newcomers access to incumbents’ cellphone and internet networks at below-market prices
For years, the country’s three largest telecom companies threatened to cut spending on their domestic networks in response to federal government policies that put competition ahead of profits.
At the same time Prime Minister Mark Carney pushes business leaders to boost investment in Canadian infrastructure, telecom chief executive officers are slashing spending on the country’s digital backbone, its fibre and wireless services. In simple terms, established operators are pushing back against a series of Canadian Radio-television and Telecommunications Commission decisions that gave newcomers access to incumbents’ cellphone and internet networks at below-market prices.
Companies that benefitted from these policies include Quebecor Inc., which offers its Freedom Mobile cellphone service over Rogers’ system, and Telus, which won access to its rivals’ fibre in Eastern Canada. In the regulated telecom sector, where executives seldom take shots at politicians, CEOs are firing live ammo. When Rogers announced financial results in late April, CEO Tony Staffieri used an investor call to take direct aim at the CRTC.
He explained telecom companies spend billions of dollars on technology in expectation of payoffs that stretch over decades.
“We need government policies that reward investment and maintain certainty, especially in a slow-growth environment,” said Mr. Staffieri. “The government has introduced policies that do the opposite, and this means we need to adjust our spending. ” Rogers spent $4-billion to improve its operations in 2024. The company cut its 2026 capital spending by more than 30 per cent, to between $2.5-billion and $2.7-billion.
Shortly after Mr. Staffieri took an axe to spending, analyst Maher Yaghi at Bank of Nova Scotia said: “Rogers’ decision to slim down capex spend and focus on improving free cash flow production in the face of regulatory policy headwinds is exactly the right call. ” Rogers’ share price popped on the announcement. What’s bad for the future of Canada’s digital infrastructure is good for the company’s profits and cash flow.
Bell and Telus are following the same game plan, cutting back on investments in domestic networks that serve the bulk of the population, while putting money into businesses with better prospects. Three years ago, Bell cut back planned spending on legacy operations, including its domestic fibre-to-the-home network. Instead, the company investing in infrastructure for artificial intelligence data centres and acquiring U.S-based Ziply Fiber.
Last Thursday, when Bell announced its financial results, CEO Mirko Bibic said: “In the current environment, we’ve seen others in the industry recalibrate their capital spending. We totally understand that because it’s what we’ve been doing. ” On Friday, Telus CEO Darren Entwistle announced the company was “moderating capital expenditures” by taking next year’s capital spending down 10 per cent, to $2.3-billion. In recent years, Mr. Entwistle put a priority on spending on digital health care and agriculture technology businesses.
There’s a case to be made for the incumbent telecoms, at least in part, as authors of their own misfortune. Bell and Telus carry significant debt after heavy spending on 5G cellphone networks and replacing copper with fibre. Rogers is paying down leverage taken on to pay for the $26-billion takeover of rival Shaw Communications Inc. All three telecoms are cutting capital spending in part to fix their balance sheets.
The telecoms are also cutting back on network spending because the government’s decision to turn off the taps on immigration means far less demand for cellphones and new fibre than the CEOs expected. Canadians made it through the nightmare of the COVID-19 pandemic because business and education were able to move online relatively smoothly. The domestic telecom companies proved their worth in a global crisis.
Looking ahead, everyone agrees our economy will become more reliant on telecom technology in a future defined by AI and online efficiency. Facing that future, Bell is putting its money into a U.S. fibre platform, Rogers is spending on sports and Telus is betting big on digital health care. The CRTC and a Prime Minister obsessed with kick-starting infrastructure investment need to roll out policies that give the telecoms a reason to focus on their bread-and-butter businesses: robust domestic networks.
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