Friday, September 02, 2016

On cost comparisons

Following up on yesterday's column, let's take a moment to examine just how foolish the Wall government's insistence on trying to sell off SaskTel is even as a matter of pure dollars and cents.

Again, I've previously calculated the benefit to Saskatchewan consumers with SaskTel wireless plans at $396 million per year. But that was based on a number of subscribers which has since increased to about 630,000.

Moreover, it doesn't take into account anybody whose plan through another provider features lower prices due to SaskTel's presence in the market. From SaskTel's own estimate of its market share at 70% (which surely doesn't figure to overestimate the number of competitors' subscribers), the total number of wireless subscribers whose prices are influenced by SaskTel's alternative would rise to roughly 900,000.

Applying the $55 per month difference in wireless pricing, the net cost to consumers with wireless plans would then increase to $594 million every year.

But what about the effect of eliminating the provincial operating debt, which is supposedly the Sask Party's bottom line in determining whether to pursue a sale? There, the latest provincial budget (PDF) lists total government debt charges at $297 million per year (see p. 52).

Those numbers make for a rather tidy comparison. For every dollar Saskatchewan could expect to save in interest payments by using the proceeds of a SaskTel sale to eliminate the province's operating debt, we'd pay two dollars to the remaining telecom companies due to a less competitive wireless market alone.

And that's leaving aside both other services provided by SaskTel, and the direct financial impact of losing SaskTel's ongoing profits. On the latter point, Wall has tried to fearmonger about the risk that a changing market might reduce current net income levels (estimated (PDF) to be roughly $100 million for the 2016-2017 year). But it's hardly a better position to know for certain that the number will be zero - as would be the case if SaskTel is sold off.

In sum, Brad Wall's plan to sell off SaskTel is an obvious financial loser for Saskatchewan. It's the people of the province who stand to pay hundreds of millions of dollars each year to give effect to Wall's distaste for public enterprise - and we should be nothing but suspicious of a government wanting to stick us with that bill solely to boost corporate profits.

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