Resident upset with sale
of Bruce Telecom

By Liz Dadson

Kincardine council

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Christina Wahi says Kincardine council has betrayed its constituents by selling Bruce Telecom to Eastlink.

In committee-of-the-whole Feb. 19, Wahi brought her concerns and questions to council.

Despite two media statements and a letter to the editor by mayor Larry Kraemer, council has done nothing to assuage feelings of betrayal, deceit, disappointment and disillusionment, she said.

"If council would see fit to alleviate some of the concerns regarding the sale, the following questions must be answered," said Wahi:

  • Why did council decide to proceed with the sale of Bruce Telecom when the board of directors had voted (five out of seven board members) to not go forward with the sale?
  • If council couldn't run a profit-generating business, one that it had had experience with, how can council presume to run a gas company, with which it has no prior practicalprofessional experience and which requires a higher financial investment?

She said council ambiguously cites upgrades and a 'significant amount of money' as reasons for the sale.

"Mayor Kraemer decided to clear the air, and disclosed that the dollar figure was $10-million," she said. "He still failed to stipulate what time period this investment would be spread out over - 10 years, five years, 20 years? Furthermore, he conveniently neglected to take into
account the $3-million that Bruce Telecom had sitting in the bank, and one would assume had been earmarked to help fund this project.

"As Bruce Telecom is a business within the tech sector, I am sure many would agree it is safe to assume that upgrades are a part of the trade, so that begs the question, what are the upgrades that are required? Keeping in mind that Bruce Telecom self-financed a $5.5-million VDSL network infrastructure upgrade project recently (and still maintained an $800,000 dividend)."

She said that investing capital back into a company is generally considered to be sound economics and overall a good general business practice. "When and what has the Municipality of Kincardine invested in Bruce Telecom?"

Wahi said council stated that had a public process taken place, the market value of Bruce Telecom would have been negatively impacted. "What studies were done by council to support this statement and what was the projected decline in dollar value?"

She noted that council's motion states it accepted an offer for the sale of Bruce Telecom for $24-million which does not include the $3-million in cash available to Bruce Telecom - that money stays with the municipality. 

"Yet, in every single press release that I have come across, the sale price for Bruce Telecom is being listed at $26.5-million, a figure that many feel is already far under market value. Why is council intentionally misleading the public, into believing that the company sold for $3-million higher than Eastlink paid?"

Wahi told council that in 2007, Eastlink purchased AmTelecom for in excess of $100-million, with approximately double the customer base as Bruce Telecom - that would roughly put the value of Bruce Telecom, without taking inflation intoaccount, at a cool $50-million.

"With better leadership from council, this municipality could do better," she said. "Kincardine should reconsider the sale of Bruce Telecom. And the community needs to band together and submit its complaints to the municipality."

In future, she said the municipality should hold a referendum vote for municipal assets worth more than $5-million.

Kraemer said the decision to sell Bruce Telecom was made by council. There was no vote taken by the board, even though it did not agree with the sale.


He said the $26.5-million sale price comes from $24-million plus $3-million, minus $500,000 in adjustments. He said that valuation was partly based on EBITA (Earnings Before Interest, Taxes and Amortization).

In 2010, the valuation was at $6.5-million, but had dropped to $4-million by 2013.

"The local telephone market is set to open wide and rates will go down," said Kraemer.

He urged people to look up an article about the sale of the Dryden Municipal Telephone System. That municipality ignored the advice it was given and held onto its failing company, which was valued at $12-million to $15-million in 2007. Four years later it suffered losses of $4-million per year and the municipality was in huge debt. It eventually sold for $4.5-million.

"We didn't even know about that at the time we made our decision to sell," said Kraemer.

Deputy mayor Anne Eadie said council looked at this from every angle and it was difficult to sell a local company that has such a rich history.

She said the CRTC (Canadian Radio-television and Telecommunications Commission) ruling meant Bruce Telecom would no longer have a monopoly on local phone service.

As for the natural gas project, Eadie said that is an entirely different topic. 

"This was one of the hardest decisions I'll ever have to make," said councillor Jacqueline Faubert. "It was an intensive summer. We had binders of information and met with a lot of experts. And it's still a potential sale so we can't discuss the details, but it was not a decision we took lightly."

She said once the deal goes through (in 60-90 days from Jan. 22), she hopes more information can be given to the public.

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