Tuesday, April 13, 2010

Sasktel's Profits Disappear

Source: CBC News: SaskTel Profit Hits $129M in 2009

This year, was a good year to be Saskatchewan's telecommunications provider. The company saw a 7% increase in their overall profit from last year, showing that the Crown Corporation was doing well within the province.

Enter Brad Wall.

The Wall Government announced that 80% of that $129 million dollar profit ($1,032,000 if my math is correct) will be taken by the Government and put into the Crown Investments Corporation. Wall further compounded this problem by announcing that in 2010, 100% of SaskTel's profits will be taken by the government.

That right, SaskTel a profitable crown corporation, will see no benefit of being able to grow in Saskatchewan, and will instead be forced to borrow money in order to have financing for the year.

This move will add $50 million dollars worth of debt onto SaskTel's books, but yet the government is not backing down, with Don Morgan (The Minister responsible for SaskTel) simply saying that SaskTel has a "good capacity to borrow...that's an acceptable thing to do."

SaskTel has said that it would have to have borrowed money this year regardless of how much of the profits the government was taking. This is understandable, in that my understanding of business states that companies with good profits usually do need some extra funding to do all the things they need to do within the next year, so that part alone is fine.

An example of this is the $90 million dollar investment SaskTel was planning to upgrade cellular service within the province. The Wall Government has since deferred half of these payments to an unknown date. So, despite a $129 million dollar profit, which could have helped pay towards this upgrade, SaskTel will barely see half of the $90 million dollars needed.

SaskTel has said that they believe the government is only taking 100% of their profits for a year, but the government has indicated that this 100% share could go on for much longer.

So, why is the government taking money from SaskTel?

It's true, that some percentage of the Crown Corporation's profit always goes to the government. That's the purpose of a Crown Corporation, to have some of the wealth generated by the corporation to return into the province. But 80% is a bit of an excessive number, while 100% is completely uncalled for.

The reason, we all know, is two-fold for why the Wall Government is taking such an exorbitant amount from the Crown Corporation.

The first reason, is purely financial. Since being elected, the Wall Government has enjoyed the years of good planning and surplus left behind by the NDP Governments of Roy Romanow and Lorne Calvert. Programs which these two men put in place were starting to reap benefits for the people of Saskatchewan, and we truly were in a boom.

Wall, of course, took credit for the boom in Saskatchewan and proceeded to spend money like a person with poor budgeting skills who just won the lottery. Wall and his government quickly burned through the almost $2 billion dollar surplus left behind by the NDP, and the Government of Saskatchewan started to run a deficit...

Although, Wall and Finance Minister Rob Gantefoer, have done everything in their power not to admit to running a deficit, even though the provincial auditor has implicitly said that Saskatchewan is indeed running a deficit.

To cover this deficit problem, the Wall Government has been pulling funding from the 'Rainy Day Fund' and from the Crown Corporations to make their budgets appear balanced. Quite simply, the Wall Government is taking these profits to shore up their budget numbers and make it look as though Saskatchewan is still in the black as opposed to the red.

Grant Devine used a similar tactic, shuffling debts and expenses to different areas of Saskatchewan's economy so that they didn't have to be reported as compound debt within the budget. It was only when the Romanow Government was elected that we saw just how much trouble Saskatchewan was in; and I fear we're going to see the same thing when the Wall Government is voted out.

As I mentioned, there are two reasons why the Wall Government would be taking 100% of SaskTel's profits. The first, as stated, is financial. The second, is ideological.

There is no doubt that the Wall Government has a disdain for our Crown Corporations. The Wall Government has always been the 'government of free enterprise', yet they introduced a Saskatchewan First Policy which took away the ability of our Crown Corporations to invest outside of Saskatchewan, selling off profitable assets which in turn stripped away profits from the Crowns.

Despite this Saskatchewan First Policy, the Wall Government has spent a lot of money outside of Saskatchewan themselves; just like the $8 million dollars spent in Vancouver for the Saskatchewan Olympic Pavilion. So, while it's alright for the Wall Government to spend money outside of the province, apparently it's not alright for our Crowns.

The Wall Government has taken profits from numerous Crowns, like SaskPower and SaskEnergy, which coincidentally have increased their rates on Saskatchewan residents by the way.

So, where's the benefit in stripping the Crowns of profitable services outside of Saskatchewan? Where's the benefit in forcing the Crowns to increase rates on residents?

The benefit, in the eyes of the Wall Government, is the destruction of our Crown Corporations. By making the Crowns unprofitable, and by forcing higher rates onto the residents of Saskatchewan, the Wall Government is undoubtedly hoping to push Saskatchewan residents away from the Crowns and open the province to outside competition.

Once the floodgates are open, the Crowns are no longer needed and will eventually be shut down; meaning that whatever free enterprise businesses replaced them will in turn have a stranglehold on our province and be able to charge whatever they want.

The Wall Government is attempting to privatize our province by stealth; despite campaigning on leaving the Crowns alone. Just like they campaigned on the idea of sound financial management; just like they campaigned on having no need for essential services legislation; just like they campaigned on maintaining the boom Saskatchewan was starting to experience.

Obviously, none of those campaign promises were kept.

Saskatchewan residents to need to wake up to the tactics Brad Wall is using to destroy the Crown Corporations in our province, simply in a misguided ideal that private investment is better suited to these areas then the Crowns.

Saskatchewan residents need to stand up, and to borrow a phrase from the Save Our Saskatchewan Crowns movement, tell Brad Wall that 'This isn't Alberta, buddy."


Anonymous said...

Your post absolutely rocks! As a 25 year employee of SaskTel, I can say clearly that the company which was once at the cutting edge of telecommunications technologies and services has slipped badly over the last few years. It is without a doubt this is at least partially due to the revenues being pillaged as you have stated so well. Employees are being nickeled and dimed on a continual basis while management salaries and perks have exploded out of control. The latest example is how this Wall government wants to abolish the earned day off that inscope employees have had since the late 1970's. Morale is at an all-time low, and inscope wages have been slipping behind industry standards. Also, there has been a heavy concentration on creating as many management positions as possible while keeping inscope positions to a bare minimum - with continual reduction targets being imposed year after year. Obviously, this Wall government is preparing the Company to be sold as you pointed out.

Anonymous said...

Re: "$129 million dollar profit ($1,032,000 if my math is correct)"

Your math is not correct. ~$1 million is not 80% of $129 million; it's 0.8%.

$129,000,000 x 0.8 = $103,200,000

Alas, hardly better...