Monthly Archives: October 2012

An article in the Globe and Mail last week titled CRTC spikes BCE-Astral deal outlined the turning down of Bell Media and Astral Media’s merge. The Canadian Radio-television Telecommunications Commission (CRTC), regulator of Canadian broadcasting and telecommunications systems opposed Bell Canada Enterprise’s (BCE Inc.) takeover of Astral Media last week. The $3-billion acquisition was claimed to be in too much favour of the telecommunications corporation rather than considering the effect on consumers.

With a single corporation controlling a majority of Canadian broadcasting systems which would include 100 new radio stations, 30 television stations and a mix of 56 other services, the price of services would definitely be driven up. The CRTC believes that the deal would give one media company too much power and inflate the prices. The opposition of this deal shows that the “CRTC will turn away any deal where the Canadian broadcasting companies try to earn bigger shares in the competitive market” – if they put the shareholders interests before the consumers. The deal would give Bell a competitive advantage in Quebec as it would control 42% of the English television market and 33% of the French. While Bell argued that it needed the deal in order to compete with international competition such as Netflix. The CRTC does not believe that Bell needs to expand in order to be more competitive. The deal was turned down because Bell would be acquiring too much control over Canadian Broadcasting market.

In an article titled , Toronto condo resales falter as listings climb in the Globe and Mail last week, Canada’s most populated city, Toronto, a large number of condos are being built. While the price of new condos rise, the number of units rented are slowing down. The resale prices of houses have been flattening out after years of increase while monthly rent rates also decline. With the new supply of units available for rent and recent mortgage insurance rule changes, potential tenants are becoming hesitant to populate new locations. The new mortgage rule changes are causing a clear shift in the balance between sellers and buyers and owners and tenants. The condo market is also experiencing no specific change in price of resale condos. Cost of new condos are rising, however the price of pre-constructed condos in the city have been dropping over the year.

This is an apparent issue because a rapid increase in supply for housing in Toronto means that prospective tenants are unable to adjust quickly enough to the condo market changes. Therefore more and more highly priced condos will be vacant after construction and sunk costs are created when units of value are not being occupied. Such costs include the cost of production, loss in rent, depreciating value of the unit.

Photo link: /The Globe and Mail
http://beta.images.theglobeandmail.com/1c8/report-on-business/economy/housing/article4617114.ece/ALTERNATES/w620/condo17rb2.JPG

In last week’s article, The price China must pay to win Nexen, from the Globe and Mail, China’s CNOOC Ltd. pending acquisition of Canada’s Nexen Inc. was described as ambiguous and opaque.  CNOOC’s takeover of Nexen’s oil-company is a negotiating $15.1 US-dollar transaction. Although Nexen poses little strategic value to Canada as it has been on the sale market for so long, the Canadian government is hesitating to allow too much foreign control of Canada’s natural resources. Canadian executives are concerned with the unclear guidelines regarding foreign takeovers and worry about working terms and protections. As part of the Canadian Investment Act, the takeover needs to pass the “net benefit” test, however the rules remain vaguely defined.

The pros of the takeover include bringing in more capital investments, chance of higher productivity, innovative technology and new management ideas. The cons involve allowing a state-owned company to acquire much control over Canada’s oil industry. Which factors will outweigh the other?

A Globe and Mail article reports that beginning this week, NewPage Port Hawkesbury paper mill in Cape Breton will reopen since shutting down last September. The Nova Scotia government has agreed to provide large subsidies to save some 600 mill workers and 400 forestry contractors. This is not the first time that the Cape Brenton mill has asked for government assistance. Date from the 1970s show that the Nova Scotia has continued to support the failing business through changing American, Finnish, and Canadian owners. The issue is that the government cannot continue to pour money into ineffective companies when the taxpayer money can and should be used for better solutions or in places such as education. Although large subsidies will save jobs in single town industries, it also shows how taxpayer money is being used inefficiently. This article raises the question of how far should the governments go to save failing industries.

This week, the Globe and Mail report on business described in As Australia pulls back on mines, Canada on alert, that the mining industry in Australia is experiencing a decline in profits. Due to China slower economic growth, nations that depend heavily on exporting iron ore and coal to China, Australia and Canada in particular are experiencing serious impacts. Resource companies are discovering that operation costs are rising and skilled workers in the industry are becoming scarce. To make matters worse, the Australian government recently set a 30-per-cent tax on mining profits. Even Australia’s BHP Billiton PLC, the world’s largest mining company reported its first decline in profits in three years. Recognizing these losses, mining companies are trying to achieve more technologically efficient methods to reduce costs and sourcing experienced workers from overseas.