Federal delays on 5G poses challenge for SaskTel

Better and faster Internet access is the future focus for SaskTel, according to the company’s annual report released Monday.

It’s spending millions on expanding broadband and fibre access through the province, and in improving those services getting people wider and faster connections.

According to the report, the company spent $282 million on capital projects to improve all of its networks during the 2018-19 fiscal year.

When it comes to online access, the report said SaskTel’s Internet customers increased 1.3 per cent in that year, hardline Internet to people’s homes increased 26.2 per cent, and wireless data usage increased 19.2 per cent.

SaskTel says a big part of being able to handle the demand for access in the future will be creating a 5G network, but that poses a problem.

The company’s CEO said 5G development has been slowed down in Canada because of the Huawei and China questions — trade issues and concerns over network security.

According to Don Morgan, minister responsible for SaskTel, the company is waiting for direction from the federal government regarding whether Huawei equipment can be used to build the network.

“The federal government had indicated that they were going to have a direction for us sometime this fall, prior to the federal election,” Morgan said. “They’ve now said they won’t have anything prior to the federal election.”

Morgan said he has been in contact with federal Public Safety Minister Ralph Goodale’s office as well as other ministers’ offices, pushing for answers.

“We need a clearer direction on this. We’ve got Huawei equipment used throughout the 4G network. If we’re going to upgrade to 5G, we need to know what direction we’re going, what we’re going to do, and sooner the better,” Morgan said.

SaskTel said, for now, it’s running some testing for 5G with Telus and Bell and is using universal towers so the equipment can be switched out if necessary.

SaskTel CEO Doug Burnett said the company may start some 5G trials in 2020 or 2021.

The rollout of 5G networks in Canada is also dependent on two spectrum auctions, according to SaskTel, so widespread rollout of the systems wouldn’t happen until 2020 at the earliest. The report says that, along with the capital investment needed for the network, could weight on profit margins in the medium-term.

Cord-cutters

We hear about cord-cutting more and more, that people all over the country are  flocking away from traditional cable. But that doesn’t seem to be a problem for SaskTel.

“(Fewer people subscribing to cable) is the national trend, but in Saskatchewan we actually saw an increase in our overall take rate on maxTV and maxStream,” said Burnett.

MaxTV subscriptions rose 1.5 per cent last year.

SaskTel does acknowledge people’s TV-watching preferences are moving more and more to streaming. It seems to be trying to get into that game, heavily promoting its new MaxTV Stream service.

Looking at the books

SaskTel made $127.4 million in net income in the last fiscal year, and paid $116.3 million in dividends to the Crown Investments Corporation.

In a media release, the company said the increased income stemmed from increased wireless adoption, a resurgence in Internet growth as people turn to SaskTel’s fibre network, and growth in managed and emerging services.

The Crown corporation is having some trouble with competitors when it comes to its cellular services, though, saying that its mobile business went up but its share of the market went down slightly, ceded to companies like Telus and Bell.

Burnett said Telus and Bell tend to be the price leader in Saskatchewan, dropping prices to get a bigger market share.

From the NDP

Warren McCall, the Saskatchewan NDP’s critic on the SaskTel file, said this report is more proof of how valuable Crown corporations are to Saskatchewan.

McCall did name three points that he deemed cause for concern. He said the debt limit having been raised while the province took more dividends from the company was concerning.

Huawei was also identified as a concern for McCall.

He called the situation a mess that the government and the Crown corporation have got into, and said he would have expected more discussion and analysis of it in the annual report.

“They need to have a better answer in terms of what’s coming and what those options are, because again, this is the people’s corporation,” McCall said. “SaskTel is very much valued by the people of Saskatchewan and the people of Saskatchewan deserve better from the government on this file.”

McCall also talked about the ongoing contract disputes. There are multiple employee contracts that are still being negotiated, and one where strike action will be voted on this week by members.

“That it’s been allowed to go on as long as it has I think speaks to the priorities of this government, and a place where they’re getting them wrong,” said McCall.