Shares of Telus and BCE Inc. rose this morning after RBC Dominion Securities’ Jonathan Allen published a report speculating that the two biggest telecom players in Canada would merge within two years.
“Faced with cyclical and secular pressures on the top-line, we believe that a BCE-Telus merger is increasingly likely in the coming year or two as both companies look to cut costs and sustain margins.”
“There is only so much cost cutting that can be achieved individually. The scale benefits from a merger of Bell and Telus are substantial.”
Allen suggests that the arrival of greater competition in the wireless sector through the launch of 3-5 new firms in the next year should help remove regulatory hurdles for a deal.
With both BCE and Telus are seeing their growth squeezed in response to new competition and changing consumer habits, this new environment is forcing them to find new ways to cut costs. And Allen estimates that a combined company would produce savings of $1.2 Billion annually.
Not surprisingly, officials from Bell were not available for reaction and Telus’ spokesman declined to comment on rumour and speculation.