Advertising merger to form $35B colossus

Omnicom Group Inc. and Publicis Groupe SA say they are combining in a "merger of equals" that will create the world's largest advertising firm, one worth more than $35 billion.

The combined company will be called Publicis Omnicom Group and be jointly led by Omnicom CEO John Wren and Publicis CEO Maurice Levy as co-chief executives. The move is designed to bolster the companies' focus on growing Asian and Latin American markets such as China and Brazil, where they each have ramped up operations to counter lackluster growth in weak European markets.

Major clients

But although a combined firm will allow for more pricing power in general, the decrease in competition could present regulatory hurdles in the U.S. and Europe. Client conflicts also could be an issue, as rivals such as Coca-Cola Co., PepsiCo, McDonald's, Yum Brands' Taco Bell, Johnson & Johnson and Procter & Gamble now find themselves under the same umbrella.

Rich Tullo, an analyst at Albert Fried & Co. in New York, predicted pushback from regulators in both the U.S. and France. The U.S. could be wary of one company controlling such a large portion of the market, he said, while in France, authorities might not take warmly to any Americanization of a company that is a bright spot in the bruised French economy.

Tullo also questioned whether the combined company could live up to promises like the $500 million in cost savings touted with the announcement, given Europe's shaky financial condition. "That sounds like financial alchemy, if you ask me," he said.

Omnicom Group Inc., based in New York, owns BBDO Worldwide, DDB Worldwide Communications Group and TBWA Worldwide, among other agencies. Paris-based Publicis Groupe SA runs its namesake agency as well as Leo Burnett Worldwide, Saatchi & Saatchi and DigitasLBi. Their merger creates a company with combined annual revenue of about $23 billion, leapfrogging them over current London-based industry leader WPP PLC.

Other holdings

For the first year, Omnicom Chairman Bruce Crawford will serve as non-executive chairman of the new company. He will be succeeded by Elisabeth Badinter, the current Publicis Groupe chairwoman, and daughter of its founder, for the second year.

Levy is slated to take the non-executive chairman's seat after 30 months, leaving Wren to continue as sole CEO from that point.

Omnicom, which also owns public relations firms such as Fleishman-Hillard, Porter Novelli and Ketchum, reported 2012 profit of nearly $1 billion on revenue of $14.22 billion. Earlier this month, the Madison Avenue giant posted second-quarter earnings that topped analysts' average forecast, though revenue growth of 2 percent fell just short of expectations.

Founded in 1986, Omnicom generates just over half of its revenue from U.S. clients, and about one-quarter from European and British markets combined. The company's stock has risen 31 percent in the last 12 months, recently peaking at $67.43 on the New York Stock Exchange.

Omnicom will benefit from Publicis' strategic shift in the last few years toward digital operations, as the French company beefed up its digital marketing profile with the acquisitions of Digitas, Razorfish, Rosetta, Big Fuel and LBi. Publicis, which had revenue of $8.78 billion in 2012, had targeted generating 75 percent of its revenue in digital and fast-growing countries by 2018, according to a recent investor presentation.

The move gives Publicis, which has faced questions about who will succeed 71-year-old Levy, access to Omnicom's well-regarded senior leadership, said James Dix, an analyst at Wedbush Securities.

More consolidation

Analysts said the deal also represents even more consolidation in an industry that is already dominated by just a few players, a fact that might not sit well with U.S. regulators.

If the Omnicom-Publicis combination goes through, the combined company would account for nearly 40 percent of the U.S. ad industry, twice as much as the nearest competitor, WPP, according to Brian Wieser, an analyst at Pivotal Research Group in New York.

Wieser said Sunday the deal came as a surprise to many in the industry. Omnicom, he said, has "always been viewed as too large to get any larger."

The combined company will have more than 130,000 employees.

One concern is whether Omnicom and Publicis can strike a harmonious balance of power - something that can be difficult in mergers of similar-sized companies.

"It's not clear yet who really is in the driver's seat," Wieser said. "That will emerge over time."

The fact that the two firms are based in different countries could also become an issue, Dix said. "You have these fiefdoms that keep people from playing together. One company is based in Paris, one is in New York. Where is the power center?" he said in an interview Saturday.

Board approval

Dix expects that top executives are comfortable with the structure of the deal, but the adjustment may be more difficult for the next level of executives who run the firms' units.

"Now they have to fit together into a broader organization," Dix said. "If you lose clients or have defections of senior executives then you have something that looked good on paper but didn't quite play out."

The combination has been approved by the boards of both companies, but remains subject to regulatory approval in both the U.S. and Europe, and to a vote by shareholders of both companies. The deal is structured so that the shareholders of Publicis Groupe and Omnicom, after special dividends, will each hold approximately 50 percent of the company.

Publicis Groupe shareholders will receive one new share of Publicis Omnicom Group for each Publicis Groupe share they own, together with a special dividend of 1 euro per share. Omnicom shareholders will receive 0.813 new shares of Publicis Omnicom Group for each Omnicom share they own, plus a special dividend of $2 per share. The new company intends to be listed in Paris and on the New York Stock Exchange.

The combination could have a domino effect on the industry, spurring marriages between other ad giants who might fear they can't compete otherwise, said Michael Corty, an analyst at Chicago-based Morningstar. "Within the ad agency industry, this is potentially an earthquake deal."

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Valeant cutting up to 15% of workforce

Valeant Pharmaceuticals International, Inc. said Monday that it will eliminate as much as 15 per cent of its workforce and move Bausch + Lomb's headquarters to New Jersey as part of its $8.7 billion acquisition of the company.

In a letter to its own and Bausch + Lomb workers, the Laval, Que.-based drugmaker said that after the deal closes, it will eliminate between 10 per cent and 15 per cent of positions companywide. That works out to between 1,850 and 2,775 people and is expected to include both Valeant and Bausch + Lomb workers.

Valeant said it will remain based in Quebec, but it will move Bausch + Lomb's Rochester, N.Y., headquarters to New Jersey. The U.S. company's three businesses will be combined into one unit.

The company will continue to operate all of its current U.S. manufacturing locations, including those in Rochester, it said. Valeant added that it expects to receive regulatory approvals by early next month and hopes to close the deal as soon as possible after that.

Valeant announced plans in May to purchase Bausch + Lomb, one of the world's best-known makers of contact lenses, marking a massive expansion of its own smaller ophthalmology business.

The company said at that time that the cash deal will help it capitalize on increasing demand for contact lenses and other products because of aging populations, growing demand in emerging markets and increasing rates of diabetes. Complications of the complex blood sugar disorder can damage the eyes over time.

Valeant expects to achieve at least $800 million in annual cost savings by the end of next year, and said the acquisition will add to its profits immediately.

Investment firm Warburg Pincus, which leads an investment group that owns Bausch + Lomb, will receive $4.5 billion in cash. The remaining $4.2 billion will be used to repay Bausch + Lomb's debt.

Shares of Valeant fell 34 cents to close at $94.06 on the Toronto Stock Exchange.

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Canada's U.S. ambassador disputes Obama's Keystone claims

Canada's ambassador to the U.S. is disputing U.S. President Barack Obama's claim that the proposed Keystone XL pipeline would generate few jobs.

Gary Doer said he would prefer to rely on a U.S. State Department report that estimates the number of jobs to be created by the pipeline project is 40,000, and not the 2,000 figure used by Obama.

Obama, in an interview with the Sunday New York Times, said only 2,000 positions would be created in the first year or two during the construction of the pipeline, and after that, the job total would dwindle to between 50 and 100 jobs. Obama also told the Times he thought Canada could potentially be doing more to "mitigate carbon release."

However, in a Monday interview with CBC's Rosemary Barton on Power & Politics, Doer said, "I think at the end of the day we'll go with the State Department report. It's his [Obama's] agency in the sense it's the lead agency."

Doer added that the report, at 200 pages, was much broader than what he termed "a little short media interview."

The proposed Keystone XL pipeline is designed to carry 830,000 barrels of crude oil per day from the Canadian oilsands and the Bakken shale in North Dakota and Montana to refineries on the U.S. Gulf Coast.

Obama has final approval on pipeline

Obama rejected the project last year, but invited the builder, TransCanada Corporation, to file a new application with a different route that would address environmental concerns in the state of Nebraska.

The State Department report Doer referred to is a draft version, with the final report due this fall. However, Obama has the final approval over whether the XL pipeline will go ahead.

Doer also disputed Obama's contention that Canada wasn't doing enough to mitigate carbon emissions. He said that Canada and the U.S. are moving in the same direction when it comes to regulating vehicle emissions, which he described as "the largest source of greenhouse gases."

When it comes to coal, Doer said, Canada is well in advance of the U.S. in relying less and less on the fuel for electrical generation.

But on the issue of oil and gas industry regulations, Doer said the Canadian government is "working on it."

He added, "I suspect at the end of the day we'll again be ahead of the United States or certainly not behind them on modernizing those oil and gas regulations in Canada."

'U.S. is calling Canada's bluff'

Doer's defence of the pipeline was echoed by Alex Pourbaix, TransCanada's president of oil and energy pipelines. Speaking with Power & Politics on Monday, Pourbaix told Barton the industry has voluntarily reduced emissions per barrel by 26 per cent, even in the absence of government regulations. He also said that the pipeline project would be "keeping the entire U.S. pipeline industry employed over the next few years."

However, Gillian McEachern of Environmental Defence told CBC News the Obama interview indicates "the U.S. is calling Canada's bluff on the fact that we're doing very little and really nothing at the federal level to limit the carbon pollution coming from the oil sector."

McEachern said it's significant Obama is dismissing and backing away from some of the key economic arguments around jobs and gas prices.

"He has quite clearly put this decision in the climate realm, and said that his decision will be based on its impact on climate change," McEachern said.

Doer explained Obama's remarks by saying, "There's a fight between Republicans and Democrats right now on the economic agenda." Republican and business groups in the U.S. are pressuring the Obama administration to approve the pipeline proposal because of the jobs they say it will bring.

Doer also said if the pipeline is not approved, "it will come down to trains instead of pipelines." However, he hastened to add, "the tragedy at Lac-Mégantic we are not using. We would never use that. It's horrible, it's terrible. The reasons for it are not fully understood."

Doer also brought up the subject of energy security.

"This pipeline is proposed to displace oil from Venezuela, which I know most Americans would support — oil from Canada as opposed to oil from Venezuela."

A final decision on Keystone is expected later this year, or early in 2014.

With files from Reuters and The Canadian Press

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Hudson's Bay to bring Saks to Canada in $2.9B takeover

Hudson's Bay Co. is buying luxury U.S. retailer Saks Inc. in a friendly deal worth $2.9 billion US.

The Bay says will pay $16 US per Saks share and assume all the latter's outstanding debt as part of the deal. Saks shares closed Friday at $15.31 on the Nasdaq stock market, but the $16 offer is 30 per cent above where Saks shares were in late May, before takeover speculation pushed the price higher.

HBC has been kicking the tires on its U.S. rival for the past few months. The Canadian company isn't alone in that, however. A report in the New York Post suggested HBC could face competition from several other unnamed buyers for Saks, including numerous private equity groups. HBC was the largest retail name to emerge, however, and that interest was confirmed by the release of the formal offer on Monday.

'It's great news for the competitive marketplace'—Marketing professor Ceren Kolsarici

Saks has a 40-day window in which it is allowed to solicit other offers, but HBC declined to offer details of what the break fee might be if the deal falls apart.

"While we serve different markets, we have a lot in common," HBC's chief executive Richard Baker said on a conference call to discuss the deal. "I've had a long connection with Saks over the years, and am thrilled to bring one of the world's most recognized luxury retailers into the HBC family."

The HBC executive team says it hopes to bank $100 million in cost savings from streamlining operations, but cautioned that HBC shareholders can expect a significant dividend cut — from more than nine cents per share, down to five cents — once the company has digested the debt required to process the transaction.

That's likely bad news for HBC stock, but it could be offset by another piece of information: that the company is looking into forming a real estate investment trust (REIT) out of the combined company's extensive real estate holdings, Baker confirmed.

"We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organization," Saks chairman and CEO Steve Sadove said.

HBC shares gained about seven per cent to $17.64 on the TSX following news of the offer. Saks shares were up 3.5 per cent in New York, changing hands at $15.86 US per share on the NYSE.

Retail battles

The U.S. retailer operates 42 stores, including its flagship Saks Fifth Avenue in New York. HBC has 48 Lord & Taylor department stores in the U.S. northeast. In Canada, it has 90 Bay department stores and 69 Home Outfitters housewares stores.

In the call, Baker suggested the company hopes to open as many as seven full-line Saks stores and 25 Saks Off Fifth locations in Canada. The latter is the name for Saks's discount outlet stores.

Some of those new stores could come in the form of rebranding and relaunching existing Bay stores, the company said.

Saks in Canada would be a key weapon HBC could use in a coming high-end retail war in Canada. Nordstrom is set to launch a number of locations within the year, and the arrival of an iconic name such as Saks could help HBC compete.

"It's great news for the consumer, it's great news for the competitive marketplace," Queen's University marketing professor Ceren Kolsarici said in an interview with CBC News.

Kolsarici said the move is a savvy one by Canada's oldest company to head off Nordstrom and stake a claim on the high end of Canada's retail landscape while it still can. "There is enough room on the high end of the market," she said.

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Potash price hammered as Russians may flood market

Shares of major North American potash producers fell sharply Tuesday on word that a Russian company is pulling out of a marketing group and is expected to undercut competitors' prices for the fertilizer.

OAO Uralkali announced Tuesday it was withdrawing from a joint venture with another company from Belarus that set the price for about a third of the world's potash supply. Instead, it plans to sell more potash to China, which buys about one fifth of the world's supply of the fertilizer.

'The overall market is likely to remain in surplus for the next few years.'—CIBC World Markets on the outlook for potash

"Our co-operation with our Belarusian partners … has come to a deadlock," Uralkali CEO Vladislav Baumgertner said in a statement posted on the company's website.

"In this situation we have to redirect our export deliveries through our own trader," he said, adding he wouldn't exclude the possibility of co-operation on a mutually beneficial basis in future.

Uralkali has a much lower cost of production than rival PotashCorp of Saskatchewan, which was briefly Canada's most valuable company in 2010 before the government stepped in and blocked a $40 billion takeover offer from Australian mining giant BHP Billiton.

Sharp selloff

"Uralkali's announcement completely turns the global potash market upside down," analyst Elena Sakhnova of VTB Capital in Moscow told Bloomberg.

"If previously global potash producers were acting like an oligopoly, working with the rule that benefited higher potash prices … now the market will be fully competitive."

Uralkali has expenses of roughly $170 for every ton of potash it produces. That compares with the industry average of $240 a ton, an agricultural analyst at Goldman Sachs noted in a report Tuesday.

The moves by Uralikali could move the price of potash below $300 a ton, the company's CEO warned Tuesday.

After a run-up before and after the global recession that began in 2008, the world potash market is currently oversupplied.

"The overall market is likely to remain in surplus for the next few years," CIBC World Markets said in a recent research report. "That implies that the outlook for prices will hinge to some degree on producers' ability to maintain overall production discipline."

A major supplier pulling out of the cartel that had effectively been setting prices is a clear sign that discipline is ending, which means companies will have to vie for market share while prices move lower.

Saskatchewan as a whole has the world's largest reserves of potash, with PotashCorp holding the lion's share. Canadian potash companies typically sell through a similar venture known as Canpotex, which is able effectively to set prices because of its size.

Shares in Canada's major potash companies sold off heavily Tuesday in reaction to the news. At one point, PotashCorp plunged almost 25 per cent to $28.70 US in New York trading. Mosaic fell $13.11 or 24.64 per cent to $40.10, and Agrium was down $11.93 or 13.05 per cent to $79.50.

With the selloff, PotashCorp has now lost roughly 50 per cent of its value since the BHP Billiton takeover was blocked in 2010. Adjusted for stock splits, PotashCorp is getting close to the level it was at before BHP Billiton came on the scene.

The company lowered its earnings forecast by roughly 20 per cent last week, citing lower prices.

"Highly competitive markets around the world had an impact on our results," PotashCorp chief executive Bill Doyle said at the time.

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Smartphone use way up in Canada, Google finds

Not only is smartphone ownership way up in Canada, users are getting increasingly addicted to their mobile devices, suggests a new report released by Google.

Based on online surveys with 1,000 Canadians earlier this year, the report estimates that 56 per cent of adults were using a smartphone, up from 33 per cent in early 2012.

About eight in 10 smartphone owners said they don't leave home without their mobile device. And two-thirds of them said they had used their phone every day in the past week.

About 35 per cent said they'd become so reliant on mobile connectivity that they'd give up TV before having to part with their smartphone.

"Mobile has become a core part of how people live their lives today," said Google Canada's head of mobile advertising Eric Morris.

"The study shows people are using mobile to change all aspects of their life, whether it's their job, travel, shopping, the way they communicate with others, and specifically trying to understand the world around them."

About 78 per cent of the smartphone users said they connected to social media with their device and 52 per cent said they logged on daily.

Video views increasing rapidly

Morris said he was struck by the number of users who reported they were watching video on their phone. About 75 per cent said they had streamed video on their small screen and almost one in five said they did it daily.

"People watch videos on the biggest screen they have available to them," said Morris.

"Sometimes that's your 50-inch TV at home, sometimes that's your tablet while you're on the couch or in bed, and sometimes that's the smartphone while you're on the couch or travelling or even in the office.

"I think one of the interesting things from this survey is there is a lot of mobile consumption that's being done in the home...on home WiFi."

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Pneumonia shots made affordable for kids in poor countries

Drugmaker Pfizer Inc. has agreed to provide hundreds of millions of doses of its lucrative vaccine against pneumonia and meningitis at a fraction of the usual price for young children in poor countries.

The deal to provide 260 million shots of its Prevnar 13 vaccine for a few dollars each is Pfizer's third agreement under an innovative program through which pharmaceutical companies, governments, health groups and charities collaborate to bring poor countries a long-term supply of affordable vaccines against deadly diseases.

Prevnar 13 protects against 13 strains of pneumococcal disease that can cause serious infections. (Pfizer/Associated Press)

Prevnar 13, called Prevenar outside the U.S., protects against 13 strains of pneumococcal disease. The bacterial disease can cause painful ear infections common in young children and serious infections that can kill or leave survivors deaf, paralyzed or with permanent learning or speech disabilities. Those diseases include pneumonia, bloodstream infections and meningitis, an infection of tissue around the brain and spinal cord.

Pneumococcal disease kills more than 1.6 million people annually, half under age 5 and nearly all of them in poor countries, according to the World Health Organization.

One Prevnar dose costs nearly $130 US in the U.S. — unaffordable in much of Africa, Asia and Latin America. In fact, most new Western vaccines don't reach poor countries for 10 to 15 years.

To change that, four years ago several countries and the Bill & Melinda Gates Foundation together donated $1.5 billion US to develop a tactic that could provide the needed vaccines. An additional $1.3 billion US was pledged by a public-private partnership called GAVI, formerly the Global Alliance for Vaccines and Immunization, whose members include UNICEF, WHO and the World Bank.

The money was used to start a pilot program that would guarantee steady, high-volume demand for vaccine makers who agree to sell their vaccines for $3.50 US each or less to poor countries. Experts picked pneumococcal vaccines as the first project.

The program also aims to increase vaccine production capacity and encourage companies to develop vaccines for diseases common in the poorest countries.

Prevnar was launched in Western countries in 2009. Pfizer made the first supply agreement for it under the program in 2010, and a second one in 2011. Those deals, running through 2023, covered 480 million doses.

The alliance has estimated the pneumococcal vaccines could save up to 1.5 million lives by 2020.

"More than 10 million children have been reached with GAVI-supported pneumococcal vaccines in 29 countries since 2010. We expect to reach children in more than 50 countries with this lifesaving vaccine by 2015," Dr. Seth Berkley, CEO of the GAVI Alliance, said in a statement, adding that the goal is to make the program sustainable in the long term, partly by securing very low vaccine prices.

The latest deal gives Pfizer $3.40 US a dose for Prevnar this year, then $3.30 US per dose through 2025. For about the first 20 per cent of doses, Pfizer gets an extra $3.50 US, from the $2.8 billion US pledged by the charities and wealthy governments.

"Strong vaccination programs are a cornerstone of economic development — a simple intervention that has dramatic short- and long-term impact on health," Susan Silbermann, Pfizer's president of vaccines, said in a statement.

New York-based Pfizer is the world's second-biggest drugmaker, selling medicines including Viagra and pain relievers Lyrica and Celebrex. Prevnar is the top-selling vaccine ever, with annual sales just over $4 billion US.

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Is Verizon really the 'bogeyman' Canada's telecom giants claim?

Canada's three big mobile-phone providers have been ramping up their campaign to sway public sentiment against the potential entry of U.S. telecom giant Verizon into the wireless market.

"They're trying to use the bogeyman of a U.S. company to scare Canadians into supporting a change to [current wireless] rules and really kind of push the government to doing an about-face on their policies," said Steve Anderson, founder of OpenMedia, an advocacy group for affordable wireless access.

Just in the past week, for example, Bell Canada took out a two-page advertisement in major newspapers, while top executives at Rogers and Telus relayed their displeasure during interviews with a series of media outlets.

"But is Verizon a big, bad bear about to gobble up Canada?" asked Iain Grant of the SeaBoard Group, a telecommunications consultancy.

Here's a look at what Canadians need to know about the potential deal and why it matters.

What's the issue?

On June 26, media outlets reported that Verizon had offered to buy Canadian upstart Wind Mobile with an initial bid of $700 million, and was also in talks about buying fellow upstart Mobilicity. Verizon has called the moves just an "exploratory exercise."

Despite that, Canada's big three telecoms — Rogers, Bell and Telus — have cried foul to the notion of the American giant entering Canada's wireless market this way, as these smaller companies had been given an advantage in the periodic auctions for wireless spectrum in an attempt by Ottawa to boost competition and hopefully drive down prices for consumers.

Verizon's bid comes after the federal government made changes in 2012 to the telecommunications rules that allowed foreign entities to enter the Canadian sector, albeit with certain limitations.

Canada's telecoms are concerned that if Verizon were to take over one of the "new entrants," it would qualify for special status at an upcoming auction of lucrative broadband spectrum, which is what allows wireless providers to expand their networks.

Two blocks of spectrum have been set aside for new entrants. And Bell's argument is that because the big three are prohibited from bidding on these blocks, they are likely to be sold at a lower price.

Who is Verizon and why does it care about Canada?

Formerly known as the Bell Atlantic Corporation, this New York-based telecom was founded in 1983. It is the second largest cellphone provider in the U.S., with nearly 100 million customers.

But, "this isn't a stranger to the country," notes Grant. "This is a company that helped establish the Canadian telecommunications market as it now is."

Verizon once owned a large chunk of BC Tel, which later became Telus. But it sold its portion in 2004 to focus on its U.S. operations.

But why would a U.S. giant want to re-enter the Canadian market, with its small population spread over a vast area and where the total number of cellphone subscribers is not even a third of those in the U.S.?

"It makes a lot of sense for it to offer its services to its [American] customers in Canada," said Grant. "Similarly offering services to Canadians who spend a lot of time in the United States. Offering a seamless North American plan."

What does this all mean for Canadians?

There's been considerable speculation that if Verizon were to set up shop in Canada it could lower rates for customers, thanks to more competition; or perhaps offer more premium-priced contracts with better service.

Benefits could also include eliminating roaming charges when Verizon customers travel anywhere in North America.

"Right now, we pay some of the highest prices in the industrialized world for some really horrible service, and that one way or the other needs to change," said Anderson.

However, the Canadian carriers, and some analysts, have suggested that Verizon's entry into the Canadian market could force the big three to focus on competing with the giant, which could result in job losses and a slowdown in efforts to expand advanced wireless services to rural Canada.

Grant suggests that demand would drive Verizon to invest across the country, not just in major cities.

"Verizon's [U.S.] customers come into the country every day through all of the bridges and ports of entries and they want to roam where they want to roam, whether that's fishing in Saskatchewan or hunting in northern Ontario or wherever."

What are Canada's telecoms saying?

Rogers has accused the federal government of aggressively courting Verizon; Telus has warned of a "bloodbath," and Bell charges that "loopholes" are being opened to a "U.S. company that is four times the size of Canada's entire wireless industry."

Full-page newspaper and online ads are part of a campaign launched by the three to change public opinion and try to push the federal government to adjust its policy.

Is the system fair for Canadian companies?

A large part of the Canadian telecom companies' argument is based on the idea of an unfair playing field.

All three say they support competition, but they say rules brought in by the Harper government give foreign companies an advantage they would never get in the U.S.

"It wasn't meant to be a level playing field," said Grant. "It was meant to give a leg up."

In the midst of the furor over Verizon, Industry Minister James Moore has stood resolute on the issue: "Our view has been clear, we want effective competition across Canada."

Large carriers in Canada still can't be more than a third foreign-owned. But ownership restrictions were lifted on those "new entrants" with less than 10 per cent of the market share of all telecommunications services, which includes not only wireless but also home phones, fixed-line internet and TV.

What happens next?

The big event looming over the sector is the spectrum auction set for January. Any company wanting to bid in the auction must submit its application by Sept. 17.

On the auction table is the 700 megahertz spectrum. Incumbents call it the most valuable one ever sold because towers using its higher frequency have wider coverage, which means fewer towers would need to be built to cover a particular area.

"If you put a tower up in 700 megahertz, that thing is going to go forever," said Grant. "It goes through concrete, it goes through granite, it goes through walls."

But while it's the first time in 25 years that a section of the spectrum is for sale (the last one took place in 1985), Grant notes it's not the last time.

The 600-megahertz spectrum — offering even wider coverage — will likely go on sale in the next few years, he says.

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Hudson's Bay to bring Saks to Canada in $2.9B takeover

Hudson's Bay Co. is buying luxury U.S. retailer Saks Inc. in a friendly deal worth $2.9 billion US.

The Bay says will pay $16 US per Saks share and assume all the latter's outstanding debt as part of the deal. Saks shares closed Friday at $15.31 on the Nasdaq stock market, but the $16 offer is 30 per cent above where Saks shares were in late May, before takeover speculation pushed the price higher.

HBC has been kicking the tires on its U.S. rival for the past few months. The Canadian company isn't alone in that, however. A report in the New York Post suggested HBC could face competition from several other unnamed buyers for Saks, including numerous private equity groups. HBC was the largest retail name to emerge, however, and that interest was confirmed by the release of the formal offer on Monday.

Dividend cut

Saks has a 40-day window in which it is allowed to solicit other offers, but HBC declined to offer details of what the break fee might be if the deal falls apart.

"While we serve different markets, we have a lot in common," HBC's chief executive Richard Baker said on a conference call to discuss the deal. "I've had a long connection with Saks over the years, and am thrilled to bring one of the world's most recognized luxury retailers into the HBC family."

The HBC executive team says it hopes to bank $100 million in cost savings from streamlining operations, but cautioned that HBC shareholders can expect a significant dividend cut — from more than nine cents per share, down to five cents — while the company handles the debt required to process the transaction.

That could be offset by news that the company is looking into forming a real estate investment trust (REIT) out of the combined company's extensive real estate holdings, Baker confirmed.

"We believe this transaction delivers compelling value to our shareholders and that Saks Fifth Avenue is an excellent fit within the HBC organization," Saks chairman and CEO Steve Sadove said.

Retail battles

The U.S. retailer operates 42 stores, including its flagship Saks Fifth Avenue in New York. HBC has 48 Lord & Taylor department stores in the U.S. northeast. In Canada, it has 90 Bay department stores and 69 Home Outfitters housewares stores.

In the call, Baker suggested the company hopes to open as many as seven full-line Saks stores and 25 Saks Off Fifth locations in Canada. The latter is the name for Saks' discount outlet stores.

Some of those new stores could come in the form of rebranding and relaunching existing Bay stores, the company said.

Saks in Canada would be a key weapon HBC could use in a coming high-end retail war in Canada. Nordstrom is set to launch a number of locations within the year, and the arrival of an iconic name such as Saks could help HBC compete.

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Bank of Cyprus savers to lose 47% above 100,000 euros

The Cypriot government says depositors at the country's largest bank will lose 47.5 per cent of their savings over the 100,000-euro ($132,000 Canadian) insurance limit.

€

Losses at Bank of Cyprus were initially estimated at 37.5 per cent. Another 22.5 per cent of the deposits remained tied up while experts calculated how much money the bank would need to remain solvent. Government spokesman Victoras Papadopoulos announced the figure Monday.

Depositors hit with losses will get shares in the bank.

Large depositors in Cyprus' two biggest lenders were forced to take losses as a condition of a 23 billion-euro ($30.5 billion) rescue package the country agreed on with its eurozone partners and the International Monetary Fund in March.

Restrictions on money withdrawals and transfers were imposed for all banks to head off a run.

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Halliburton to plead guilty to destroying Gulf spill evidence

Halliburton Energy Services has agreed to plead guilty to destroying evidence in connection with the 2010 Gulf of Mexico oil spill, the Department of Justice said Thursday.

Federal officials said in a news release that a criminal information charging Halliburton with one count of destruction of evidence was filed in federal court in Louisiana.

Halliburton has agreed to pay the maximum fine, be on probation for three years and continue to co-operate with the government's criminal investigation, according to the news release, which did not list the amount of the fine.

The Houston-based company has also made a $55 million voluntary contribution to the National Fish and Wildlife Foundation. It was not a condition of the court agreement, the news release says.

The company said in a statement Thursday night that it had agreed to plead guilty "to one misdemeanor violation associated with the deletion of records created after the Macondo well incident, to pay the statutory maximum fine of $200,000 and to accept a term of three years probation."

The explosion on the Deepwater Horizon drilling rig in the Gulf of Mexico killed 11 people and caused billions of dollars in damages along the U.S. Gulf Coast. Here, oil booms are used in Redfish Bay in Louisiana's birdsfoot delta in May 2010. (Jeffrey Dubinsky/Gulf Restoration Network/Reuters)

The Justice Department has agreed it will not pursue further criminal prosecution of the company or its subsidiaries for any conduct arising from the 2010 spill, Halliburton's statement said, adding that federal officials have also "acknowledged the company's significant and valuable cooperation during the course of its investigation."

The plea agreement is subject to court approval, the company said.

Halliburton was BP's cement contractor on the drilling rig that exploded in the Gulf of Mexico in 2010. The blowout triggered an explosion that killed 11 workers and spilled millions of gallons of oil into the Gulf.

According to the news release, Halliburton conducted its own review of the well's design and construction after the blowout, and established a working group to review "whether the number of centralizers used on the final production casing could have contributed to the blowout."

The casing is a steel pipe placed in a well to maintain its integrity.

Centralizers are metal collars attached on the outside of the casing. Centralizers can help keep the casing centered in the wellbore.

"Centralization can be significant to the quality of subsequent cementing around the bottom of the casing," the news release said.

Prior to the blowout, Halliburton had recommended to BP the use of 21 centralizers in the well, but BP decided to use six instead, the news release says.

Around May 2010, the news release says, the company directed a program manager to conduct two computer simulations of the Macondo well final cementing job "to compare the impact of using six versus 21 centralizers."

The simulations indicated there was little difference between using six and 21 centralizers, but the program manager "was directed to, and did, destroy these results," federal officials say.

Similar evidence was destroyed in a subsequent incident, in June 2010, the Justice Department said.

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GM gains on Toyota for carmaker crown

Toyota shrugged off China sales woes to stay the world's top selling automaker for the first half of this year, outpacing U.S. rival General Motors Co., which boasted such bragging rights for seven decades until 2008.

Toyota Motor Corp. sold 4.91 million cars and trucks around the world for the January-June period, down 1.2 per cent from the previous year, according to numbers it released Friday.

GM said earlier this month it sold 4.85 million vehicles worldwide in the six months, growing almost 4 per cent as it gained U.S. sales faster than Toyota. For the second quarter alone, GM had a slight edge, outselling Toyota by about 10,000 vehicles.

GM was the top-selling automaker for seven decades before losing that title to the Japanese automaker in 2008. GM retook the spot in 2011, when Toyota's plants were slowed by an earthquake and tsunami in northeastern Japan that wiped out parts suppliers.

Toyota has since recovered and was at the top again last year even as sales in China were hurt by anti-Japanese sentiment that flared over a territorial dispute, setting off boycotts and riots. The deep sales slump that started in the second half of last year has waned in the past few months and Japanese automakers might be poised to start growing again in China.

Toyota stayed ahead of GM in the first half of 2013 because of solid sales in other regions. The maker of the Prius hybrid and Camry sedan also did better than expected in Japan, where the auto market has been stagnant for years.

Volkswagen AG of Germany, which includes in its group Audi, Porsche and other brands, trailed Toyota and GM in the global race, selling 4.7 million vehicles during the first half of this year.

Yet it is posting strong growth in countries such as China, offsetting a bleak European market, and it is also determined to become No. 1.

One key difference between Toyota and the two other automakers is that it manufactures heavy trucks. GM and Volkswagen have light trucks but no heavy trucks in their lineup.

Excluding sales of 78,000 trucks for Toyota's Hino Motors, Toyota's global vehicle sales totalled about 4.83 million for the first half, according to Toyota.

Toyota President Akio Toyoda said sales were not the only measure of excellence, and profitability, quality of workers and productivity were also significant.

"What truly defines being No. 1 is an eternal pursuit for which there is never an answer," he told reporters this week.

GM officials also say they don't care who wins the global sales race. But the numbers tend to reflect company momentum, and the outcome is good for morale not only for employees but the wide range of industries that auto manufacturing supports in each nation.

Yasuaki Iwamoto, auto analyst at Okasan Securities Co. in Tokyo, believes Toyota's popularity in Southeast Asia will continue to boost vehicle sales numbers in coming months. And that is a key plus for a manufacturer.

"The merit of scale is not just about numbers and is likely to lead to cost cuts," he said in a report.

At a recent opening of a Toyota training facility, Keiji Furuya, a lawmaker and government minister, told the crowd he was proud of Toyota's achievements.

"Toyota is the No. 1 automaker in the world. And it is important it stays the No. 1 automaker in the world," he said.

Tatsuo Yoshida, auto analyst at Mitsubishi UFJ Morgan Stanley Securities Co., expects Toyota, GM and Volkswagen to be switching places at the top in coming years as all three can count on growth in different global markets.

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Federal government posts $2.7B deficit in April, May

The federal deficit widened to $2.7 billion in the first two months of the current fiscal year, the finance department announced Friday.

The shortfall in April and May was 50 per cent larger than the $1.8 billion deficit recorded in the same period a year earlier, after revisions were made to the method used in calculating monthly income tax revenues.

Revenues in the first two months rose by $557 million to $41.8 billion on higher income tax and EI premium revenues. At the same time, program expenses grew by $1.35 billion to $39.2 billion, mainly because of higher transfer payments to persons and other levels of government.

Public debt charges rose by $106 million to $5.4 billion because of higher consumer price index adjustments on real return bonds.

In his March budget, Finance Minister Jim Flaherty projected that the current year's deficit would come in $18.7 billion for the year as a whole. Because revenues and expeditures are not processed at rigidly set intervals and are subject to revisions, it is too early in the fiscal year to determine if the government is on track with its deficit projection.

The federal budget is not expected to be balanced until 2015.

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Don Pittis: Detroit pension meltdown a wake-up call for Canadians

About The Author

Don Pittis has been a Fuller Brush man, a forest fire fighter and an Arctic ranger before discovering journalism. He was principal business reporter for Radio Television Hong Kong before the handover to China and has produced and reported for CBC and BBC News. He is currently senior producer at CBC's business unit.

Also by the Author

Author Recommended Links

Detroit pensioners woke up last Friday to shattered retirement dreams, and the haunting question that people around the world are now asking themselves is, "What about mine?"

In its bankruptcy filing last week, the city declared its pension and benefit commitments to be part of its debt, leaving a Federal judge to decide how to distribute Detroit's remaining assets between pensioners and other creditors.

From a business point of view it is all quite rational. Over the years, the city government made more promises than it could possibly afford to pay. About $18 billion more.

But there's more happening here than rational business decisions. In bankruptcy, when there just isn't enough money to go around, each of the creditors takes a share of the hit. This time they are expected to get between 10 and 20 cents for every dollar they are owed — and that includes the city's pensioners.

Detroit has shown that the promises of politicians don't last 30 years. And neither do the promises of companies.

People who have worked a lifetime for the city, responsibly choosing a job and sticking with it because they knew it included a safe pension, abruptly have to think again.

They could have taken their skills and commitment elsewhere, taken risks and pursued more adventurous jobs, sailed around the world or lived cheap on the beaches of Goa, or taken a flyer on a career as an actor or novelist. In other words, they could have lived like the grasshopper instead of the ant in the Aesop's Fable — making enough for a roof and entertainment week to week but never setting a penny aside for the long winter ahead.

And eventually relying on social assistance in their old age. As the Wealthy Barber author David Chilton has said, people without a pension generally don't save enough.

But the pension contributors in Detroit weren't the fabled grasshoppers, they were the ants. They were the responsible ones who considered the future and planned ahead so they could pay their own way. They chose jobs with salary agreements that included the promise of a fund for their retirement.

Every month money was taken from their pay. Every month, the paperwork showed that their employer had added its share to the pension pot. Periodically a form would arrive in the mail telling them how much they would get if they continued working until the age of 65. But all the time the paperwork was a lie.

And as I mentioned last week, there is a growing view that the crisis in Detroit may not be unique, that there are more public-sector bankruptcies to come. Others have weighed in on the subject since, some seeming to blame pensioners for the growing potential financial crisis, saying they are taking more than their share.

The point they're missing is that pensions are crucial to a healthy economy.

As everyone keeps telling China, until the country develops a reliable social safety net, a consumer-led society can never take off. Employees must be able to trust their pensions will actually be there when it comes time to draw on them, or their ant-like personalities will force them to hoard even more when they're working, instead of recirculating that cash into the economy.

And safe pensions do exist. The best ones are those that money managers give themselves.

In this type of blue ribbon pension there is no promise to pay on some future day. The money is set aside in a separate account. It is well managed in diversified investments. Its future value, and thus the amount added to the fund each year, is determined by realistic long-term rates of interest. It is not based on a 30-year-old promise by some now-defunct politician and subject to the whims of whoever is calling the political shots today.

Detroit has shown that the promises of politicians don't last 30 years. And neither do the promises of companies.

Canada's own Nortel, the airlines and the Detroit auto makers themselves are just a few of the private firms proving that promises given years ago to inspire loyalty when workers were desperately wanted are worth nothing when the workers are no longer needed.

As the blue-ribbon pensions show, money actually set aside and invested wisely over a 40-year working life provides a reliable retirement income. Stocks really do return 8 per cent over the long term. Bond returns are low now, but many years in the last 40, bonds were paying double-digit rates.

But as with those blue ribbon pensions, the secret is that the money must actually be set aside and invested by honest, qualified professionals. Pension funds that do that, like the Ontario Teachers Pension Plan, or the Canada Pension Plan, provide reliable returns.

Without that, a promise to pay is only as good as the changing fortunes of the organization making the promise.

Pensions backed by promises from governments with relatively low debt, like Canada's, are safe for now. And as CBC's Amber Hildebrandt has reported, in Canada cities are backed by their respective provinces if things go sour.

Other governments and companies are not in such good shape. In the wake of Detroit, employees and unions making deals with healthy governments and private sector employers must learn not to accept promises. They must demand that cash be set aside now, placed in a well-run fund, and managed for the long term.

Either that or the ants might as well join the grasshoppers. Buy a sailboat, and don't come home till you are old and sick and looking for social assistance.

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Obama disputes job projections for Keystone XL pipeline

U.S. President Barack Obama called into question the number of jobs that would be created from the controversial Keystone XL pipeline in an interview with the New York Times released on Saturday.

"Republicans have said that this would be a big jobs generator," Obama said, according to the newspaper.

"There is no evidence that that's true. The most realistic estimates are this might create maybe 2,000 jobs during the construction of the pipeline, which might take a year or two, and then after that we're talking about somewhere between 50 and 100 jobs in an economy of 150 million working people."

'Republicans have said that this would be a big jobs generator. There is no evidence that that's true.'—U.S. President Barack Obama

TransCanada Corp's proposed pipeline is designed to carry 830,000 barrels of crude oil per day from the Canadian oil sands and the Bakken shale in North Dakota and Montana south to refineries on the U.S. Gulf Coast. It would cost about $5.3 billion US to build.

Obama's administration is under pressure from Republicans and business groups to approve the project because of the economic benefits they say it will bring.

Environmentalists oppose the project because of the carbon pollution they say it would generate. Carbon emissions are blamed for contributing to global warming.

Gas prices

The project was first proposed in 2008 but is still making its way through a State Department study process.

The Times said Obama disputed an argument that the pipeline would bring down gasoline prices. He said it might actually increase prices somewhat in the U.S. Midwest, which would be able to ship more of its oil elsewhere in the world, the paper reported.

Obama said in June the project would serve U.S. interests only if it did not "significantly exacerbate" carbon pollution. The Times quoted him as saying that Canada could potentially be doing more to "mitigate carbon release."

The administration's final decision is expected later this year or early in 2014.

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Federal government posts $2.7B deficit in April, May

The federal deficit widened to $2.7 billion in the first two months of the current fiscal year, the finance department announced Friday.

The shortfall in April and May was 50 per cent larger than the $1.8 billion deficit recorded in the same period a year earlier, after revisions were made to the method used in calculating monthly income tax revenues.

Revenues in the first two months rose by $557 million to $41.8 billion on higher income tax and EI premium revenues. At the same time, program expenses grew by $1.35 billion to $39.2 billion, mainly because of higher transfer payments to persons and other levels of government.

Public debt charges rose by $106 million to $5.4 billion because of higher consumer price index adjustments on real return bonds.

In his March budget, Finance Minister Jim Flaherty projected that the current year's deficit would come in $18.7 billion for the year as a whole. Because revenues and expeditures are not processed at rigidly set intervals and are subject to revisions, it is too early in the fiscal year to determine if the government is on track with its deficit projection.

The federal budget is not expected to be balanced until 2015.

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Halliburton to plead guilty to destroying Gulf spill evidence

Halliburton Energy Services has agreed to plead guilty to destroying evidence in connection with the 2010 Gulf of Mexico oil spill, the Department of Justice said Thursday.

Federal officials said in a news release that a criminal information charging Halliburton with one count of destruction of evidence was filed in federal court in Louisiana.

Halliburton has agreed to pay the maximum fine, be on probation for three years and continue to co-operate with the government's criminal investigation, according to the news release, which did not list the amount of the fine.

The Houston-based company has also made a $55 million voluntary contribution to the National Fish and Wildlife Foundation. It was not a condition of the court agreement, the news release says.

The company said in a statement Thursday night that it had agreed to plead guilty "to one misdemeanor violation associated with the deletion of records created after the Macondo well incident, to pay the statutory maximum fine of $200,000 and to accept a term of three years probation."

The explosion on the Deepwater Horizon drilling rig in the Gulf of Mexico killed 11 people and caused billions of dollars in damages along the U.S. Gulf Coast. Here, oil booms are used in Redfish Bay in Louisiana's birdsfoot delta in May 2010. (Jeffrey Dubinsky/Gulf Restoration Network/Reuters)

The Justice Department has agreed it will not pursue further criminal prosecution of the company or its subsidiaries for any conduct arising from the 2010 spill, Halliburton's statement said, adding that federal officials have also "acknowledged the company's significant and valuable cooperation during the course of its investigation."

The plea agreement is subject to court approval, the company said.

Halliburton was BP's cement contractor on the drilling rig that exploded in the Gulf of Mexico in 2010. The blowout triggered an explosion that killed 11 workers and spilled millions of gallons of oil into the Gulf.

According to the news release, Halliburton conducted its own review of the well's design and construction after the blowout, and established a working group to review "whether the number of centralizers used on the final production casing could have contributed to the blowout."

The casing is a steel pipe placed in a well to maintain its integrity.

Centralizers are metal collars attached on the outside of the casing. Centralizers can help keep the casing centered in the wellbore.

"Centralization can be significant to the quality of subsequent cementing around the bottom of the casing," the news release said.

Prior to the blowout, Halliburton had recommended to BP the use of 21 centralizers in the well, but BP decided to use six instead, the news release says.

Around May 2010, the news release says, the company directed a program manager to conduct two computer simulations of the Macondo well final cementing job "to compare the impact of using six versus 21 centralizers."

The simulations indicated there was little difference between using six and 21 centralizers, but the program manager "was directed to, and did, destroy these results," federal officials say.

Similar evidence was destroyed in a subsequent incident, in June 2010, the Justice Department said.

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Dominique Strauss-Kahn to face pimping charges

The former head of the International Monetary Fund who was accused of sexually assaulting a cleaner at a New York hotel in 2010 is set to face new charges that he profited financially from a prostitution ring based out of a French hotel, prosecutors say.

A lawyer for the French politician told Reuters Friday his client will soon be charged in connection with an investigation into a rumoured prostitution ring centred in the Hotel Carlton in the French town of Lille.

Strauss-Kahn has acknowledged attending events at the hotel, but says he didn't know any of the people in attendance were prostitutes.

The charges stem back to 2012 at least, but prosecutors confirmed Friday they have no intention of letting the charges drop and plan to bring the matter through the courts.

Strauss-Kahn first gained wider notoriety in 2010 when a member of the cleaning staff at a hotel in New York City accused him of sexual assault. Those criminal charges were eventually dropped, but Strauss-Kahn is believed to have settled a civil suit with the cleaner out of court.

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GM gains on Toyota for carmaker crown

Toyota shrugged off China sales woes to stay the world's top selling automaker for the first half of this year, outpacing U.S. rival General Motors Co., which boasted such bragging rights for seven decades until 2008.

Toyota Motor Corp. sold 4.91 million cars and trucks around the world for the January-June period, down 1.2 per cent from the previous year, according to numbers it released Friday.

GM said earlier this month it sold 4.85 million vehicles worldwide in the six months, growing almost 4 per cent as it gained U.S. sales faster than Toyota. For the second quarter alone, GM had a slight edge, outselling Toyota by about 10,000 vehicles.

GM was the top-selling automaker for seven decades before losing that title to the Japanese automaker in 2008. GM retook the spot in 2011, when Toyota's plants were slowed by an earthquake and tsunami in northeastern Japan that wiped out parts suppliers.

Toyota has since recovered and was at the top again last year even as sales in China were hurt by anti-Japanese sentiment that flared over a territorial dispute, setting off boycotts and riots. The deep sales slump that started in the second half of last year has waned in the past few months and Japanese automakers might be poised to start growing again in China.

Toyota stayed ahead of GM in the first half of 2013 because of solid sales in other regions. The maker of the Prius hybrid and Camry sedan also did better than expected in Japan, where the auto market has been stagnant for years.

Volkswagen AG of Germany, which includes in its group Audi, Porsche and other brands, trailed Toyota and GM in the global race, selling 4.7 million vehicles during the first half of this year.

Yet it is posting strong growth in countries such as China, offsetting a bleak European market, and it is also determined to become No. 1.

One key difference between Toyota and the two other automakers is that it manufactures heavy trucks. GM and Volkswagen have light trucks but no heavy trucks in their lineup.

Excluding sales of 78,000 trucks for Toyota's Hino Motors, Toyota's global vehicle sales totalled about 4.83 million for the first half, according to Toyota.

Toyota President Akio Toyoda said sales were not the only measure of excellence, and profitability, quality of workers and productivity were also significant.

"What truly defines being No. 1 is an eternal pursuit for which there is never an answer," he told reporters this week.

GM officials also say they don't care who wins the global sales race. But the numbers tend to reflect company momentum, and the outcome is good for morale not only for employees but the wide range of industries that auto manufacturing supports in each nation.

Yasuaki Iwamoto, auto analyst at Okasan Securities Co. in Tokyo, believes Toyota's popularity in Southeast Asia will continue to boost vehicle sales numbers in coming months. And that is a key plus for a manufacturer.

"The merit of scale is not just about numbers and is likely to lead to cost cuts," he said in a report.

At a recent opening of a Toyota training facility, Keiji Furuya, a lawmaker and government minister, told the crowd he was proud of Toyota's achievements.

"Toyota is the No. 1 automaker in the world. And it is important it stays the No. 1 automaker in the world," he said.

Tatsuo Yoshida, auto analyst at Mitsubishi UFJ Morgan Stanley Securities Co., expects Toyota, GM and Volkswagen to be switching places at the top in coming years as all three can count on growth in different global markets.

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Don Pittis: Detroit pension meltdown a wake-up call for Canadians

About The Author

Don Pittis has been a Fuller Brush man, a forest fire fighter and an Arctic ranger before discovering journalism. He was principal business reporter for Radio Television Hong Kong before the handover to China and has produced and reported for CBC and BBC News. He is currently senior producer at CBC's business unit.

Also by the Author

Author Recommended Links

Detroit pensioners woke up last Friday to shattered retirement dreams, and the haunting question that people around the world are now asking themselves is, "What about mine?"

In its bankruptcy filing last week, the city declared its pension and benefit commitments to be part of its debt, leaving a Federal judge to decide how to distribute Detroit's remaining assets between pensioners and other creditors.

From a business point of view it is all quite rational. Over the years, the city government made more promises than it could possibly afford to pay. About $18 billion more.

But there's more happening here than rational business decisions. In bankruptcy, when there just isn't enough money to go around, each of the creditors takes a share of the hit. This time they are expected to get between 10 and 20 cents for every dollar they are owed — and that includes the city's pensioners.

Detroit has shown that the promises of politicians don't last 30 years. And neither do the promises of companies.

People who have worked a lifetime for the city, responsibly choosing a job and sticking with it because they knew it included a safe pension, abruptly have to think again.

They could have taken their skills and commitment elsewhere, taken risks and pursued more adventurous jobs, sailed around the world or lived cheap on the beaches of Goa, or taken a flyer on a career as an actor or novelist. In other words, they could have lived like the grasshopper instead of the ant in the Aesop's Fable — making enough for a roof and entertainment week to week but never setting a penny aside for the long winter ahead.

And eventually relying on social assistance in their old age. As the Wealthy Barber author David Chilton has said, people without a pension generally don't save enough.

But the pension contributors in Detroit weren't the fabled grasshoppers, they were the ants. They were the responsible ones who considered the future and planned ahead so they could pay their own way. They chose jobs with salary agreements that included the promise of a fund for their retirement.

Every month money was taken from their pay. Every month, the paperwork showed that their employer had added its share to the pension pot. Periodically a form would arrive in the mail telling them how much they would get if they continued working until the age of 65. But all the time the paperwork was a lie.

And as I mentioned last week, there is a growing view that the crisis in Detroit may not be unique, that there are more public-sector bankruptcies to come. Others have weighed in on the subject since, some seeming to blame pensioners for the growing potential financial crisis, saying they are taking more than their share.

The point they're missing is that pensions are crucial to a healthy economy.

As everyone keeps telling China, until the country develops a reliable social safety net, a consumer-led society can never take off. Employees must be able to trust their pensions will actually be there when it comes time to draw on them, or their ant-like personalities will force them to horde even more when they're working, instead of recirculating that cash into the economy.

And safe pensions do exist. The best ones are those that money managers give themselves.

In this type of blue ribbon pension there is no promise to pay on some future day. The money is set aside in a separate account. It is well managed in diversified investments. Its future value, and thus the amount added to the fund each year, is determined by realistic long-term rates of interest. It is not based on a 30-year-old promise by some now-defunct politician and subject to the whims of whoever is calling the political shots today.

Detroit has shown that the promises of politicians don't last 30 years. And neither do the promises of companies.

Canada's own Nortel, the airlines and the Detroit auto makers themselves are just a few of the private firms proving that promises given years ago to inspire loyalty when workers were desperately wanted are worth nothing when the workers are no longer needed.

As the blue-ribbon pensions show, money actually set aside and invested wisely over a 40-year working life provides a reliable retirement income. Stocks really do return 8 per cent over the long term. Bond returns are low now, but many years in the last 40, bonds were paying double-digit rates.

But as with those blue ribbon pensions, the secret is that the money must actually be set aside and invested by honest, qualified professionals. Pension funds that do that, like the Ontario Teachers Pension Plan, or the Canada Pension Plan, provide reliable returns.

Without that, a promise to pay is only as good as the changing fortunes of the organization making the promise.

Pensions backed by promises from governments with relatively low debt, like Canada's, are safe for now. And as CBC's Amber Hildebrandt has reported, in Canada cities are backed by their respective provinces if things go sour.

Other governments and companies are not in such good shape. In the wake of Detroit, employees and unions making deals with healthy governments and private sector employers must learn not to accept promises. They must demand that cash be set aside now, placed in a well-run fund, and managed for the long term.

Either that or the ants might as well join the grasshoppers. Buy a sailboat, and don't come home till you are old and sick and looking for social assistance.

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Police bust credit card hackers who stole 160 million cards

Four Russian nationals and a Ukrainian have been charged with running a sophisticated hacking organization that over seven years penetrated computer networks of more than a dozen major American and international corporations, stealing and selling at least 160 million credit and debit card numbers, resulting in losses of hundreds of millions of dollars.

Indictments were announced Thursday in Newark, where U.S. Attorney Paul Fishman called the case the largest hacking and data breach scheme ever prosecuted in the United States.

Princeton-based Heartland Payment Systems Inc., which processes credit and debit cards for small to mid-sized businesses, was identified as taking the biggest hit in a scheme starting in 2007 — the theft of more than 130 million card numbers at a loss of about $200 million.

Atlanta-based Global Payment Systems, another major payment processing company, had nearly 1 million card numbers stolen, with losses of nearly $93 million, prosecutors said.

The indictment did not put a loss figure on the thefts at some other major corporations, including Commidea Ltd., a European provider of electronic payment processing for retailers. The government said hackers in 2008 covertly removed about 30 million card numbers from its computer network.

About 800,000 card numbers were stolen in an attack on the Visa network, but the indictment did not cite any loss figure.

Not all the companies the hackers infected over the years with malicious computer software suffered financial losses. Customer log-in credentials were stolen from Nasdaq and Dow Jones Inc., the indictment said, though prosecutors said Nasdaq's trading platform was not affected.

The indictment said the suspects sent each other instant messages as they took control of the corporate data, telling each other, for instance: "NASDAQ is owned." At least one man told others that he used Google news alerts to learn whether his hacks had been discovered, according to the court filing.

The defendants were identified as Russians Vladimir Drinkman, Aleksander Kalinin, Roman Kotov and Dmitriy Smilianets, and Ukrainian Mikhail Rytikov.

Smilianets is in U.S. custody and is expected to appear in federal court next week. Drinkman is being held in the Netherlands pending extradition, prosecutors said. The other three defendants remained at large.

The prosecution builds on a case that resulted in a 20-year prison sentence in 2010 for Albert Gonzalez of Miami, who often used the screen name "soupnazi" and is identified in the new complaint as an unindicted co-conspirator. Other unindicted co-conspirators were also named.

Prosecutors identified Drinkman and Kalinin as sophisticated hackers who specialized in penetrating the computer networks of multinational corporations, financial institutions and payment processors.

Kotov's specialty was harvesting data from the networks after they had been penetrated, and Rytikov provided anonymous web-hosting services that were used to hack into computer networks and covertly remove data, the indictment said.

Smilianets was the information salesman, the government said.

All five are charged with taking part in a computer hacking conspiracy and conspiracy to commit wire fraud. The four Russian nationals are also charged with multiple counts of unauthorized computer access and wire fraud.

The individuals who purchased the credit and debit card numbers and associated data from the hacking organization resold them through online forums or directly to others known as "cashers," the indictment said. According to the indictment, U.S. credit card numbers sold for about $10 each; Canadian numbers were $15 and European ones $50.

The data was stored on computer servers all over the world, including in New Jersey, Pennsylvania, California, Illinois, Latvia, the Netherlands, Bahamas, Ukraine, Panama and Germany.

The cashers would encode the information onto the magnetic strips of blank plastic cards and cash out the value, by either withdrawing money from ATMs in the case of debit cards, or running up charges and purchasing goods in the case of credit cards.

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Bell cries foul over federal telecom rules

Bell has become the latest Canadian wireless company to cry foul over telecom rules, taking out a two-page newspaper advertisement to tell Canadians the current regime favours giant U.S. competitor Verizon.

Like its rivals Rogers Communications and Telus, Bell is calling on Ottawa to change its policies over foreign entry into the Canadian wireless marketplace.

With Verizon Communications, a U.S. wireless provider with 100 million customers, eyeing the Canadian market with a potential takeover of startup Wind Mobile or Mobilicity, the big three Canadian telecom companies say federal rules put them at a competitive disadvantage.

Last week, Telus Corp. chief executive officer Darren Entwistle warned of a "bloodbath" in wireless competition unless the rules are changed, and yesterday Rogers CEO Nadir Mohamed criticized federal rules in a chat with analysts.

Bell's argument, signed by CEO George Cope and bolstered by quotes from analysts and the business press, lays out what it calls three "loopholes" in the rules that Verizon would be able drive right through.

According to Bell, these loopholes are:

• Verizon could bid on two blocks of Canadian spectrum set aside for new entrants to the market in auction later this year. Because the big three Canadian firms are not permitted to bid on these blocks, they are likely to be sold at a lower price.
• Verizon would not have to build its own networks to remote or rural communities, but would be able to piggyback on existing networks.
• Verizon can bid to acquire small Canadian companies such as Mobilicity or Wind, but Bell, Telus and Rogers are forbidden from bidding on them.

"A company of this size certainly doesn't need handouts from Canadians or special regulatory advantages over Canadian companies," Bell says in its ad. "But that is exactly what they get in the new federal wireless regulations."

"We're ready to compete head to head, but it has to be a level playing field," Cope said in a TV interview, echoing Rogers CEO Mohamed, who also called for a "level playing field."

Cope said Verizon would scoop up easy business in big urban centres, but his company would be forced to provide it with access to more remote areas.

"That would be akin to Wal-Mart coming to Canada and the government saying to Canadian Tire, they have to give Wal-Mart 20 of their best stores and put Wal-Mart's products on their shelves," Cope said.

In June, when the new federal rules were introduced, then-industry minister Christian Paradis said the federal government wants to increase competition in the wireless market and had created the regulations to encourage new entrants.

The two blocks of spectrum set aside for new players were intended to encourage the small startups to grow and address perceptions that Canadians pay too much for wireless services.

But the potential entry of Verizon, a company Bell says is four times the size of any Canadian telecom, has spooked the wireless industry.

Bell, the main operating unit of BCE Inc., called on the federal government to allow Canadian carriers to bid on the startups like Wind and Mobilicity and to require any U.S. operator entering the market to serve all of Canada.

It also calls for opening up of the auction on Canadian spectrum to all players. Four blocks of spectrum come up for auction this fall, but the three large Canadian companies can bid on just two of them.

Nervous about competition

John Lawford, executive director of the Public Interest Advocacy Centre in Ottawa, says the big three telecom companies don't want to face a fourth, powerful competitor.

"They should be scared because chances are they're going to have more competition in the Canadian market if Verizon comes in and they are going to have to lower their prices and compete harder," Lawford told CBC News.

"It's pretty rich of them to be talking about unfairness" when they already control 90 per cent of Canadian spectrum, he added.

Lawford speculated that the telecoms are taking their fight to the Canadian public because they're not getting a sympathetic hearing in Ottawa back rooms.

"What I'm seeing is an effort, a public effort, by Canada's major wireless carriers to try to scare the government into changing its course on trying to lower wireless prices for customers by introducing another competitor," he said.

Canadian prices don't compare well

While the three large Canadian telecoms make themselves out as the little guys in their recent statements, an OECD study of telecoms in leading industrialized countries confirms that Canadians aren't wrong in believing they pay high prices for service here.

Canada is one of the most expensive countries in the OECD for data-only plans — third most expensive in a field of 34 — and is among the 10 most expensive for wireless plans, the report, released every two years by the OECD, shows.

Canadian carriers have the third-highest revenue-per-user in the G8, and the fourth-highest across the whole OECD.

Telecom expert Michael Geist points out that high prices have discouraged wireless use in Canada.

"The expensive pricing surely has an impact on wireless subscriptions," he wrote in a recent post. "Canada ranks last in the OECD in wireless subscriptions per 100 inhabitants, second last in households with a mobile telephone, and 23rd (of 34) in wireless broadband subscriptions per 100 inhabitants."

Geist points out that competition has brought prices down in other markets and more players are needed in Canada.

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Alberta oil leak cause stymies industry, scientists

Oil oozing out of the ground in northeast Alberta is killing wildlife and destroying vegetation, but government and industry scientists have no idea how to stop it or even what's causing it.

There have been four leaks at the Primrose Lake site on the Cold Lake Air Weapons Range near the Saskatchewan border since May 20, which have affected 13.7 hectares.

"We do know some animals have died – including waterfowl, beavers, tadpoles and frogs and shrews," said Nikki Booth, spokesperson for Alberta Environment and Sustainable Resources Development.

Access to the site has been limited to Canadian Natural Resources Ltd. scientists and government investigators, but Alberta Energy Regulator spokesman Bob Curran described the leaks as "basically cracks in the ground and bitumen emulsion is seeping out of these cracks."

He acknowledges "the challenges are basically figuring out what happened and then how to stop it."

Critics say the most troubling aspect of the leaks is they call into question the whole process of extracting oil by steam, which is how most oil in Alberta is produced.

Oil industry watchdog Chris Severson-Baker, with the Alberta-based Pembina Institute, points to an investigation of a similar spill in 2009 which failed to pinpoint the cause.

"The assumption is that companies and the regulators have a very good understanding of how much pressure the underground formations can tolerate, and yet this project is showing that we don't know as much as we think we know and that could affect the credibility of other types of technologies that use high pressure," he said.

"It represents just a total failure of that project design. And if this project can fail in this way in an unexplained or even unexplainable kind of way – what does that mean about other types of oil and gas extraction [that] use high pressure injection?"

With so many unanswered questions, protesters are taking to the street outside CNRL headquarters in Calgary.

Company officials turned down our request to speak about the spill.

With files from CBC's Terry Reith

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China shutters factories to fight price-cutting

China's government has ordered companies to close factories in 19 industries where overproduction has led to price-cutting wars, affirming its determination to push ahead with a painful economic restructuring despite slowing growth.

The industry ministry issued orders late Thursday to more than 1,400 companies to cut excess capacity that has led to financial trouble for manufacturers. The affected industries include steel, cement, copper and glass. It requires some companies to close outright.

Communist leaders are trying to reduce reliance on investment and trade. But a slowdown that pushed China's economic growth to a two-decade low of 7.5 per cent in the latest quarter prompted suggestions they might have to reverse course and stimulate the economy with more investment to reduce the threat of job losses and unrest.

"This detailed list shows the government is serious in its efforts to restructure the economy and is prepared to tolerate the necessary pain," said Nomura economist Zhiwei Zhang in a report. "This reinforces our view that aggressive policy stimulus is unlikely in 2012 and that growth should trend down."

Manufacturing slowdown

An investment boom and government subsidies to industries such as solar panel manufacturing prompted producers to expand rapidly until supply exceeded demand. Companies have been forced to slash prices, often to below production cost.

The government's overall measure of prices charged by producers has fallen for the past 16 months, threatening a growing number with financial ruin. A major solar panel maker, Suntech, was forced into bankruptcy this year.

Forecasters have repeatedly trimmed their growth outlook for China amid a drumbeat of data showing weakening growth in retail sales, factory output and other economic segments.

This month, the International Monetary Fund last week cut its 2013 forecast to 7.8 per cent from an 8.1 per cent outlook announced just three months earlier. The Fund's chief economist, Olivier Blanchard, said China was the country at the greatest risk of a "large decrease in growth."

Private sector forecasters say growth could dip below 7 per cent in coming quarters.

The country's top economic official, Premier Li Keqiang, was quoted Tuesday by Chinese newspapers affirming the Communist Party's growth target of 7.5 per cent this year. He said the "bottom line" for growth was 7 per cent, prompting hopes among investors for at least a limited stimulus.

Also Tuesday, the Cabinet announced a tax cut for small businesses, indicating Beijing is trying to target specific parts of the economy without a costly, across-the-board stimulus.

Thursday's order by the Ministry of Industry and Information Technology said it aims to eliminate "backward production capacity," indicating it also is meant to improve efficiency in energy and resource use.

Other industries targeted include coke, calcium carbide, aluminum, smelting of lead and zinc, paper, alcohol, monosodium glutamate, citric acid, leather, printing and dyeing, chemical fiber and batteries.

The production glut is in part a lingering cost of the multibillion-dollar stimulus that helped China rebound quickly from the 2008 global crisis.

Beijing pumped money into the economy with a wave of spending, much of it financed by state banks, on building new subways, bridges and other public works. Higher revenues for state-owned construction companies and suppliers of steel and other building materials propped up inefficient producers and encouraged some to expand.

In the cement industry, Thursday's order calls on companies to shut down facilities with annual production capacity of more than 92 million tons. Steel producers were ordered to eliminate 7 million tons of production capacity.

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Dominique Strauss-Kahn to face pimping charges

The former head of the International Monetary Fund who was accused of sexually assaulting a cleaner at a New York hotel in 2010 is set to face new charges that he profited financially from a prostitution ring based out of a French hotel, prosecutors say.

A lawyer for the French politician told Reuters Friday his client will soon be charged in connection with an investigation into a rumoured prostitution ring centred in the Hotel Carlton in the French town of Lille.

Strauss-Kahn has acknowledged attending events at the hotel, but says he didn't know any of the people in attendance were prostitutes.

The charges stem back to 2012 at least, but prosecutors confirmed Friday they have no intention of letting the charges drop and plan to bring the matter through the courts.

Strauss-Kahn first gained wider notoriety in 2010 when a member of the cleaning staff at a hotel in New York City accused him of sexual assault. Those criminal charges were eventually dropped, but Strauss-Kahn is believed to have settled a civil suit with the cleaner out of court.

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Vancouver-based Goldcorp reports $1.9 billion loss

Goldcorp Inc. is reporting a $1.93 billion US net loss in the second quarter, which it says resulted from the writedown of a major Mexican operation.

The Vancouver-based mining company says it would have been profitable in the second quarter without the writedown of the Mexican operation, Penasquito.

However, Goldcorp's adjusted earnings for the second quarter were about half what they were last year, dropping to $117 million US from $332 million.

On a per-share basis, the adjusted profit fell even more — to 14 cents US from 41 cents in the second quarter of 2012.

Analysts had been expecting Goldcorp to report 21 cents per share of adjusted earnings, according to estimates compiled by Thomson Reuters.

The adjusted earnings typically exclude writedowns that are part of net earnings.

Last year, Goldcorp — one of Canada's largest gold companies — had $268 million US of net earnings in the second quarter.

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Canadians getting richer but deeper in debt, report says

A new calculation shows Canadians are getting richer even though they may be among the most indebted in the world.

The report by Environics Analytics says Canadian average household net worth topped $400,000 at the end of 2012 for the first time in history at $400,151, thanks to a 5.8 per cent pickup during the year.

The report attributes the improvement to a 5.4 per cent increase in liquid assets and a 5.1 gain in real estate values, in conjunction with a more modest 3.3 per cent rise in debt.

The new data shows the Canadian households are still richer than their American counterparts, which had a US$381,086 average wealth at the end of 2012.

But the gap is closing. That's because while Canadian household debt rose modestly by 3.3 per cent, in the U.S. debt actually declined by 2.4 per cent last year.

But debt accumulation has slowed markedly since last July, when Ottawa imposed stricter mortgage rules to slow down the housing market.

The Bank of Canada has long warned that Canadian households owe too much, at more than 160 per cent of annual disposable income.

The household wealth calculation does not take into account government debt, which is far higher in the U.S. than Canada.

The data shows households in Regina had the biggest jump in net worth last year, rising 11.2 per cent to $391,826. That was fuelled by the strongest growth in real estate holdings among cities and the second fastest rise in liquid assets, behind Saskatoon, Environics Analytics said.

Hamilton experienced the second fastest growth in net worth among major cities, up 9.5 per cent to $420,515.

Vancouver, Calgary and Toronto remain Canada's wealthiest cities.

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Lac-Mégantic calls on railway to reimburse millions of dollars

Officials in Lac-Mégantic, Que. have set a deadline for the US-based railway at the centre of the derailment that set off explosions and killed up to 47 people.

The town says Montreal, Maine & Atlantic (MMA) has not paid workers who are cleaning up millions of litres crude oil that spilled in the disaster almost three weeks ago.

When some of the workers threatened to walk out, the town paid them a total of four-million dollars.

The town has sent a letter to MMA demanding to be reimbursed, and the letter calls on the railway to reply by 12 p.m. ET today.

Meanwhile, preparations continue for Saturday's memorial service for the victims.

Maine Governor Paul LePage will be among those at the service in Lac-Mégantic.

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Premiers take aim at Harper's new job training plan

Job training appears to be one of the most contentious issues on the table as Canada's premiers meet today in Niagara-on-the-Lake for their semi-annual get-together. At stake is a possible jurisdictional battle with Ottawa that could go on for months and threatens to cloud the issue even more.

Several provincial leaders have already vowed to fight the $900-million Canada Job Grant plan announced without consultation in the March federal budget, upset both at Ottawa's move into a provincial domain and the added cost of the program to their own coffers.

At the same time, Dan Kelly, president of the Canadian Federation of Independent Businesses, a group whose members are largely overlooked by the plan, says he hopes these provinces set their initial reactions aside and try to come up with ways to make the proposal work.

"I think that they have to take off their parochial hats," said Kelly, and start thinking about "how do we make sure the dollars go to training."

That approach, however, won't be easy. In June, a report by the University of Toronto's Mowat Centre and the Caledon Institute of Social Policy called the Canada Job Grant plan a "slap in the face" for provinces and territories — and referred to the proposal as "deeply flawed."

"The Canada Job Grant represents an aggressive federal foray into an area which had been recognized over the last quarter century as within provincial jurisdiction," the report stated.

It also argued that the program will be a windfall for employers who already invest in skills training, and would, in effect, amount to subsidizing what already exists without creating new jobs.

Meanwhile, it will miss the large number of Canada's private sector employees who work at small- and medium-sized businesses, like the kind represented by the CFIB. These companies don't usually have the capacity to organize a training program and typically rely on informal, on-the-job training.

Bigger role for business

Kelly says small and medium-sized firms represent 60 per cent of the total employment in Canada and are often the first training grounds for employees.

And while the proposed plan doesn't currently address small businesses, Kelly says it holds the kind of promise that shouldn't be ignored.

"The piece that I like the best about the Canada Job Grant is that it involves employers in a far more fundamental way in the training process … than ever before," he said.

Federal Finance Minister Jim Flaherty announced the new Canada Job Grant in the 2013 budget without, provinces said, much in the way of advance consultation. (Canadian Press)

Slated to begin in April 2014, the federal government vows that the grants program will train 130,000 Canadians each year once fully implemented.

The program would work by providing cash grants for short-term training, sponsored by employers, for those who are unemployed or underemployed.

Sponsoring organizations would have to allot up to $5,000 in funds themselves, then both the federal and provincial governments would kick in matching cash grants.

However, the new program would take $300 million out of funds that have annually gone to the provinces over the past six years through what was called Labour Market Agreements, an arrangement that allowed each province to tailor-make its own job-training program.

It also expects provinces to put up $300 million of their own in matching funds, money that could force them to cut established programs, some premiers have said.

"The reality is, if they give you $10, take back $6 and then want you to match the $6, there is a problem because you're short," Manitoba Premier Greg Selinger said in an interview Wednesday evening with CBC TV's Power & Politics host Evan Solomon.

'Mystery program'

Nearly 1.4 million Canadians don't have a job — and there are more than 220,000 vacant positions, according to the most recent Statistics Canada figures. That means that, in theory, there are six unemployed people for each job.

Figuring out how to find the right workers to fill those posts, however, is no easy task. For the past two decades, the federal government devolved responsibility for labour market training to the provinces, a natural fit since education falls under their mandate as well.

With the Canada Job Grant, however, the federal government aims to take back at least some of the control it used to wield.

Back in the 1980s, when André Juneau worked in the federal government's employment ministry, there was a huge local and regional bureaucracy to administer federal job programs, he recalls. But that's been dismantled.

"How will it be able to deliver [the plan]? How will it be able to monitor what a business does? How will it be involved in identifying workers who need the training?" asked Juneau, who is now director of Queen's University's Institute of Intergovernmental Relations.

"I don't know. And the government hasn't said anything about this."

The Canada Job Grant is what Nova Scotia Premier Darrell Dexter has called a "mystery program." Nova Scotia is among several provinces — including Ontario and Quebec — that have expressed opposition to the plan.

In Alberta, where the estimated cost of not filling vacant jobs in the province is expected to hit $33 billion over four years, according to a new study by University of Alberta's Institute for Public Economics, the response has been less critical.

"We're very supportive of making sure it's a fair program," Premier Alison Redford told reporters this week.

In his interview with CBC's Evan Solomon Wednesday, Selinger acknowledged that the federal government has a role to play to encourage labour mobility and job matches across the country, as long as they allow for flexibility to address regional markets.

Not everyone has been critical. The Canadian Chamber of Commerce and several sectors with chronic shortages welcomed the Ottawa's new jobs plan with open arms.

Warren Everson, the Chamber of Commerce's senior vice-president of policy, has said that the jobs grant plan will take skills-training choices out of government hands and put them "where they belong, in the hands of employers and Canadians who want to work."

'Devil in the details'

Juneau notes that while job training has been a provincial domain in recent years, it's also a federal concern due to labour mobility, particularly in provinces such as Alberta where skilled workers come to work in the oil industry from across Canada.

He does note, however, that there is little research on how well provincial job programs have been doing — and what exactly needs to be done to help train the unemployed.

"What makes this more complicated is that labour market policy is far from a science. It's rare that policy is a science. But labour market policy is really a pretty approximate business," said Juneau.

"Governments would like to influence how labour markets work but it's very difficult to do so."

For his part, Kelly is actively pitching his ideas to both levels of government, and much of his focus is on getting more of the informal on-the-job informal training that small businesses do recognized under the plan.

He's hoping that the provincial leaders will also spend more time on brainstorming ideas than bickering over control.

"As always the devil's in the details. This has some potential if done properly but it could be a disaster if it turns into a federal-provincial fight or if they don't do it right."

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Bell cries foul over federal telecom rules

Bell has become the latest Canadian wireless company to cry "unfair" over telecom rules, taking out a two-page newspaper ad to tell Canadians the current regime favours a giant U.S. competitor.

Like its rivals Rogers Communications and Telus, Bell is calling on Ottawa to change its policies over foreign entry into the Canadian wireless marketplace.

With Verizon Communications, a U.S. wireless firm with 100 million customers, eyeing the Canadian market, perhaps with a potential takeover of startup Wind Mobile or Mobilicity, the big three Canadian telecom companies say federal rules put them at a competitive disadvantage.

Last week, Telus Corp. CEO Darren Entwistle warned of a "bloodbath" in wireless competition unless the rules are changed, and yesterday Rogers CEO Nadir Mohamed criticized federal rules in a chat with analysts.

Bell's argument, signed by CEO George Cope and bolstered by quotes from analysts and the business press, lays out what it calls three "loopholes" in the rules that Verizon would be able drive right through.

According to Bell, these loopholes are:

• Verizon could bid on two blocks of Canadian spectrum set aside for new entrants to the market in auction later this year. Because the big three Canadian firms are not permitted to bid on these blocks, they are likely to be sold at a lower prices.
• Verizon would not have to build its own networks to remote or rural communities, but would be able to piggyback on existing networks.
• Verizon can bid to acquire small Canadian companies such as Mobilicity or Wind, but Bell, Telus and Rogers are forbidden from bidding on them.

"A company of this size certainly doesn't need handouts from Canadians or special regulatory advantages over Canadian companies," Bell says in its ad. But that is exactly what they get in the new federal wireless regulations."

Like Rogers, Bell calls for a "level playing field."

In June, when the new federal rules were introduced, then industry minister Christian Paradis said the federal government wants to increase competition in the wireless market and had created the regulations to encourage new entrants.

The two blocks of spectrum set aside for new players were intended to encourage the small start-ups to grow and address perceptions that Canadians pay too much for wireless services.

But the potential entry of Verizon, a company Bell says is four times the size of any Canadian telecom, has spooked the wireless industry.

Bell, the main operating unit of BCE Inc., called on the federal government to allow Canadian carriers to bid on the start-ups like Wind and Mobilicity and to require any U.S. operator entering the market to serve all of Canada.

It also calls for opening up of the auction on Canadian spectrum to all players. Four blocks of spectrum come up for auction this fall, but the three large Canadian companies can bid on just two of them.

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