At our house we use SaskTel services for cell phones, Internet and TV. We recently dropped our telephone land line as it became outdated. Does anyone under 30 have a land line anymore? Times are a changing.
Over the years, I have been involved in many business valuations and related business sale transactions or non-transactions. One thing that was common in determining business values was to try an remove the emotion from the decision. To be fair the emotion related to SaskTel exists on all sides of the political spectrum and I do not see that going away anytime soon.
The purpose of valuing a business is to determine the underlying value of the tangible and intangible assets. Tangible assets are the things you can touch, feel and smell, such as, land, buildings and equipment. Intangible assets commonly relate to the goodwill of the business. Goodwill can exist because of the business location, employees in the business, product line and proven profitability.
Fundamentally, a business has more overall value when it is profitable and a has a long history of profitability. Keep in mind that a business is purchased based on the future ability to be profitable. The past profitability is only used as an indicator of future profitability. Current factors that affect future profitability are always considered in determining the overall asset value because it is the future profitability that will pay for the investment purchase.
I believe SaskTel is currently profitable and has a history of profitability. It has also been on the leading edge of technology and Saskatchewan has received good value from SaskTel services. These facts are probably not disputed by many Saskatchewan residents. As with all business values, and the related decisions to purchase a business, it is the future expected profitability that is important in determining the overall value not the past profitability.
If SaskTel can maintain or enhance future profitability, then it makes sense to me to keep the crown corporation. My concerns are that there are a number of considerations that will have a detrimental affect on future profitability and, therefore, will reduce the overall value of the SaskTel’s assets in the future. In fact, one day the value could be seriously eroded in relation to the current value and it all has to do with profitability. A few questions in this regard.
- How many people are reducing services by abandoning their telephone land lines?
- How aggressive are other providers (Telus, Rogers, Shaw, ADT) trying to enter the Saskatchewan market?
- How will SaskTel deal with global technology that continues to expand services and reduce service rates?
- Given the pure competition, can a regional company like SaskTel continue to provide services at the same rates as the larger national and, eventually, international providers?
- Can you think of any factors that exist that will enhance SaskTel’s profitability in the future and maintain the current asset value?
All of the above impact SaskTel’s future profitability and the related value of SaskTel’s assets.
I also have to wonder how many people who want to keep SaskTel as a crown corporation actually use the services of other providers like Telus, Rogers, Shaw and ADT? If they are not supporting SaskTel services, then how can they argue for keeping SaskTel? I take no issue with people making their own decisions in a competitive market; however, they can not have it both ways. They have effectively already made the decision to sell SaskTel by abandoning the SaskTel services. Perhaps check with your friends and family to see what services they actually use. You may find that the SaskTel market is shrinking or will shrink as a percentage of the overall Saskatchewan market
There has been talk that a referendum is necessary to decide whether or not SaskTel’s assets should be sold. If this is done I expect we will be into a costly, emotional, political debate that can possibly lead to an uninformed decision.
Strong leadership, with the assistance of qualified professionals, is required to evaluate the business merits of selling or not selling the SaskTel assets. Given this process, I will be content with the decision either way!
My second cup is now empty……………….
