TekSavvy Solutions Inc. Seeks New Owner Amidst Wave of Independent ISP Acquisitions

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2021-05-17
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TekSavvy Solutions Inc., an independent internet service provider based in Chatham, Ont., is reportedly looking for a new owner amid a series of acquisitions of similar providers by larger telecom companies. The company has hired bankers and initiated a formal sale process, with bids currently being accepted. This move comes as TekSavvy is the last primary internet wholesale provider remaining, as other independent ISPs have been acquired by larger rivals in a challenging regulatory environment.

Several independent ISPs have been sold since February 2022. BCE Inc. purchased Ebox for approximately $139 million and Distributel for around $335 million. Telus acquired Altima Telecom and Start.ca, while Quebecor Inc. acquired VMedia. The exact amount paid for these acquisitions was not disclosed. Additionally, Cogeco Inc. paid $100 million for Oxio.

The acquisitions of independent internet providers have been attributed to policies set by Canada's telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC). In 2021, the CRTC reversed its decision to reduce wholesale rates, resulting in higher costs for independent ISPs. The regulator is currently reviewing its framework for wholesale internet access with the aim of increasing competition and reducing prices.

TekSavvy, in its submission to the CRTC, described the regulatory framework as "broken and in need of urgent relief." The company emphasized the need for swift and significant regulatory changes to protect the remaining wholesale competition and restore confidence in the regulator's ability to ensure fair pricing.

TekSavvy has been losing customers to incumbent telecoms, with its market share declining from 10% in 2019 to 6%. Analysts believe that independent ISPs will struggle to gain significant market share in the future unless there is a shift away from facilities-based regulation. The incumbents' size, ability to bundle services, and network management capabilities provide them with a competitive advantage.

TekSavvy has experienced customer attrition for years and had to raise prices during the pandemic to avoid financial losses. In 2021, the company withdrew from a wireless spectrum auction, citing the CRTC's reversal on wholesale prices as detrimental to telecom competition in Canada.
 
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