Loading...
HomeMy WebLinkAboutThe Lucknow Sentinel, 2014-02-19, Page 22 Lucknow Sentinel • Wednesday, February 19, 2014 Mayor Kraemer: Selling Bruce Telecom the best of bad options CONTINUED FROM > PAGE 1 Bruce Telecom's home -phone monopoly in the municipality of Kincardine. Also a factor, the CRTC has ordered Bruce Telecom to introduce number portabil- ity, allowing customers to change providers but keep their phone numbers, mak- ing it easier to switch over to rivals. Bruce Telecom has announced they will be fully compliant with number portability by April 15. "That just opens the whole world right up," Kraemer says. The tipping point for coun- cil came after Bruce Telecom's management and board of directors submitted a budget in July 2013 asking for $10 mil- lion over five years to expand into new territories. The plan was to stem the bleeding by expanding the customer base beyond current service areas in Kincardine, Port Elgin, Paisley, Tiverton, Southampton, and Owen Sound. As recently as 2011, Bruce Telecom was able to use cash generated from its operations and a healthy cash reserve to invest millions of dollars replacing copper infrastruc- ture with fiber optics. Butwith the company's abil- ity to generate cash on the decline and insufficient reserves, the latest expansion proposal called for $10 million in loans to be guaranteed by the municipality. Assuming the expansion plan stabilized the company's profits at current levels, it would take a decade to pay back the loan, with no guaran- tee Bruce Telecom would emerge the victor over its bet- ter -funded rivals. LUCKNOW ARENA SCHEDULE FEBRUARY 19 - FEBRUARY 25 Wed Feb 19,2014 10am 5pm 6pm 7pm 8:30pm 9:30pm Open Skating - $2 Per Skater Atom Dev Practice Bantam Dev Practice PeeWee Rep Playoff vs Bruce Penninsula Legends Practice Rec League Lagers vs Holyrood Fri Feb 21,2014 10am Open Skating - $2 Per Skater 4:45pm Jr Tyke Practice 5:45pm PeeWee Girls Practice 6:45pm Atom Rep Playoff vs Ripley 8pm Midget Girls Provincial Playdown vs Upper Maitland Sun Feb 23,2014 10:30am 11:30am 1pm 2:30pm 3:30pm 5pm 6:15pm 7:30pm 9pm Novice Dev Playoff vs Blyth/Brussels Old Devils vs Clinton PeeWee Girls Practice Public Skating - Sponsored by Lucknow Kinsmen Atom Girls vs Arran-Eldershe Bantam Rep OMHA Playoff vs Flesherton Midget Development Practice Midget Girls Prov Playdown vs BCH Cliff's Shinny Tue Feb 25, 2014 10am Open Skating - $2 Per Skater 5pm Jr/Sr Tyke Practice 6pm PeeWee Dev Practice 7pm Bantam Girls 8:30pm Lancer Practice Thu Feb 20,2014 10am Open Skating - $2 Per Skater 5pm Novice Rep Practice 6pm PeeWee Rep Practice 7pm Bantam Rep OMHA Playoff vs Flesherton 8:30pm Bantam Girls Practice 9:30pm Rec League Kintail vs Lanes Sat Feb 22, 2014 10am Jr Tyke Game vs Kincardine 11am Sr Tyke Game vs Kincardine 12pm Novice Dev Practice 1pm Atom Dev 2:15pm Novice Rep 3:15pm PeeWee Dev Playoff vs Ripley 6pm Legends 7:30pm Midget Dev Playoff vs Listowel Mon Feb 24,2014 10am Open Skating - $2 Per Skater 5pm Novice Development Practice 6pm Atom Rep Practice 7pm Bantam Dev Playoff vs Seaforth HURON TELECOMMUNICATIONS CO-OPERATIVE LTD. 519-395-3800 www.hurontel.on.ca Council balked and began to look at selling, retaining a consultant to shop the utility around to potential buyers. "When it came down to it, council could not support borrowing $10 million to invest into a telecommunications com- pany with so many potential risks and without some certainty they would see a return on that investment down the road," Kraemer says. The cautionary tale of DMTS 'We are not the first municipality to face this," the mayor says, pointing to another public telecom company - the Dryden Municipal Telephone System (DMTS) - to demonstrate the risks of expansion. In 2007, Dryden's municipal council turned down offers from Bell Aliant and TBayTel to buy DMTS for between $12 and $15 million, deciding to instead undertake an aggressive 'retain and grow' strategy. Consultants from Deloitte and Touche warned that a major expansion invest- ment carried significant risk, but Dryden moved forward with a $15 million invest- ment to expand mobility services beyond the company's traditional territory, bring- ing it into direct competition with larger regional firms. By 2012, the company had dug a $21 million hole, with the municipality on the hook for every penny. DMTS was broken up, its Internet and landline services sold to Bell Aliant for $4.5 million, its mobility services to TBay- Tel for an undisclosed sum. "We didn't want to end up being a Dryden," Kraemer says. "They faced very similar challenges, for very similar rea- sons, under very similar circumstances." What about that annual dividend? Bruce Telecom has historically served as a golden goose for the municipality at budget time, its dividend used to offset property taxes. With the sale, those pay- ments will come to an end. But Kraemer says there was no guaran- tee the payments would be sustainable in the future. "You can't distribute money you aren't making," but the money generated from the sale can create other investment opportunities, he says. "lithe funds generated from the sale are invested at four per cent, we would make the same amount of money we are now on an annualized basis and with much LIONS SWEETHEART DRAW Winners of the Lucknow Lions Sweetheart Draw were: Joyce Elphick - Shopping Spree; Gift Certficates won by the following: Gerald Hoggarth - Lucknow Co-op $100; Allan Scott - Lucknow Auto $50; Karen Spans wick- Lucknow Pharmacies $50; Marilyn Miltenburg- McRoberts Gas Bar $40; Deb Elphick-Huron Landscape $25; Carl Sloetjes-Rona $25; Juanita Shiels, Dungannon-Lucknow Cut & Curt $25; Andrea Cameron, Burlington - Hodgins Home Hardware; Doug Kuyvanhoven, Wingham- Holyrood General Store; Glenna Farrell, Kincardine-Snobelen Farms Gift Package; Bev Sangster- Cliff's Plumbing Gift Basket and Gerald Murray, Holyrood - St Helens Fish Fry Tickets. Thank you to all who supported the Lions Club. Bruce Telecom less risk;' Kraemer says. An $800,000 Bruce Telecom dividend is included in this year's municipal budget, but council decided at a Feb. 6 meeting to leave discussions on how to use the total funds from the sale until after the deal has closed. Are Bruce Telecom employees' jobs and wages secure? Just as the annual dividend was not guaranteed had Bruce Telecom stayed in public hands, neither were the jobs and wages of Bruce Telecom's approximately 80 employees, the mayor says. The company had already taken steps in recent years to reign in operating expenses, and the only place left to cut was the number of employees, their wages, and/or benefits, Kraemer says. In 2010, unionized workers accepted a 6.5 -per -cent wage cut, while management and the board accepted three -per -cent, but deeper reductions would have been necessary if the company's profitability continued to slip. "Nobody wanted to do that," Kraemer says. About 70 Bruce Telecom employees are represented by two collective agree- ments - construction and clerical - run- ning until Dec. 31, 2015. "The contracts and all obligations are being assumed by the purchaser so it is no different than it would have been if they stayed with us," the mayor says. Wage -tracking websites report Eastlink pays customer -service representatives lit- tle more than minimum wage, while tech- nicians are reported to earn salaries between $51,000 and $57,000 per year. Eastlink Regional Manager Ron Mervis would neither confirm or deny those numbers, and he said people should be aware that information made public under municipal ownership, including compensation information, may not be disclosed in the future. Ten Bruce Telecom managers are not covered by existing collective agreements. "The commitment [from Eastlink] is to offer positions to the managers as well," but what those positions are and whether DOUG MILLER Certified General Accountant Accounting and tax services for Individuals U Farmers 0 Businesses 0 Corporations 86112 St. Helens Line Lucknow 519-528-2518 they are located in the area is up to the new owners, he says. Did the municipality get a good price? Eastlinkwill take ownership of all Bruce Telecom's operations and land holdings - but not its approximately $3 million in cash - in exchange for $24 million. The municipality will also collect any profits made between now and the close of the deal. The consultants hired to solicit offers and negotiate the final sale will be paid a standard commission representing a per- centage of the closing price. "The sale price is right within the appraised value," Kraemer says, though he acknowledges that value dropped along with Bruce Telecom's earnings in recent years. Had it been sold in 2010 when it was generating more cash, it would have fetched more, perhaps as high as $35 million, the mayor says. "We could easily be criticized for holding on too long," Kraemer says, "but we wanted to give the company every chance to succeed." But had council waited and earnings continued to decline, the sale price would have collapsed even further, he says. Will the money go into the natural gas project? The mayor has been accused of push- ing the deal to advance the natural gas project, which will require untold mil- lions to develop. But Kraemer is adamant no decision has been made and no discussion held on what to do with the money. "That would be counting your chickens before they hatched," he says. "There will be a full discussion and I expect lively arguments over what we do with the money, and that will happen in full view of the public' The mayor did acknowledge he was personally in favour of looldng at using the money towards the natural gas project. "I ran on [bringing natural gas to Kin- cardine] and I have worked ever since to keep my promise," Kraemer says, stressing he has nothing to gain personally from the project. "None of the assets I own will be eligible for natural gas; not my house; not my business; nothing' The natural gas project won't be ready before the municipal election this fall, and Kraemer says he expects it will be an important poll issue. "[The public] will have a say on natural gas in who they elect to council," he says. Kramer says he has not decided yet if he will run for re-election. The sale still needs approval from Industry Canada, which is expected within 90 days. \ffKrizziti Maim Eiftios Chad Mann 519-357-3015 www.kruzinmannlimos.com A Division of Lloyd Collins Construction Ltd.