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Former top banker says premiers are ‘grandstanding’ on interest rate hikes

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On Tuesday, Newfoundland and Labrador Premier Andrew Furey became the latest provincial leader to join the growing political chorus against another interest rate hike.

Furey’s office released a letter to Bank of Canada governor Tiff Macklem in which the premier called on the bank to “more fully consider the negative impacts” interest rate hikes are having on Canadians and to forgo another rate hike “at this time.” The bank is expected to announce its next rate decision on Wednesday.

Last week, B.C. Premier David Eby sent a letter to the governor urging a halt to rate hikes in the name of affordability.

This week, Ontario Premier Doug Ford sent a similar letter — and followed it up with some of the strongest language yet from any Canadian politician on rate hikes:

“[A] message to the Bank of Canada: Enough is enough. You’re trying to kill the economy. You personally are responsible for creating inflation,” Ford told a press conference Tuesday.

“Companies do not want to invest in new equipment because of the interest rates. A lot of people can’t afford to get a mortgage because they’re struggling. They’re going to be losing their homes. That’s on your shoulders.”

The politics behind the pressure

The political pressure is coming from premiers whose governments are leaning hard on affordability as a priority.

All three premiers come from different parties: B.C.’s New Democrats, Ontario’s Progressive Conservatives and Newfoundland and Labrador’s Liberals.

One former Bank of Canada governor says there’s politics at play.

It’s terrible because the impartiality, the independence, the non-partisanship of the central bank in Canada is extremely important and this is a reckless act that put that in jeopardy.– Ross Hickey, UBC Okanagan

“It’s a bit of … political grandstanding on the part of the premier[s],” said former BoC governor David Dodge when asked about the letters.

He said he doesn’t see a problem with that.

“There’s always a dialogue between the minister of finance and the governor of the bank, between public servants in (the federal Department of Finance) and staff at the bank,” he told CBC News.

“There’s always a dialogue going on. That’s how the system is actually supposed to work. Where the problem would come is if there were no dialogue.”

Dodge said the Bank of Canada is transparent with its process and explicitly outlines the factors behind each interest rate decision, which include taking into account the public’s best interests.

Former Bank of Canada governor David Dodge says the central bank is transparent about how it makes interest rate decisions. (Tom Hanson/Canadian Press)

“How I dealt with it, and how the current governor deals with it, is to try to explain to people — and to governments — why it is that the current interest rate level, or the current policy they are pursuing, is appropriate in order to stabilize the economy, both in terms of growth and in terms of price level,” he said.

Not everyone thinks the premiers’ attempts to influence the bank are harmless. Ross Hickey, an economist and associate professor at UBC Okanagan, called the letters “ridiculous.”

“It’s reckless because we don’t want our central bank to respond to politicians at all,” he told CBC News Friday after Eby’s letter was published.

“It’s terrible because the impartiality, the independence, the non-partisanship of the central bank in Canada is extremely important and this is a reckless act that put that in jeopardy.”

It’s a politicalexercise in those premiers taking the chance to sort of stand up for regular folks in their in their provinces.– Gerald Baier, UBC associate professor of political science

Hickey compared it to attempts to influence the Supreme Court of Canada and said the Bank of Canada must remain at arm’s-length from politicians.

If interest rates are held where they are, he said, it should be because the data suggests that is the prudent move right now.

“I hope that the Bank of Canada speaks to all Canadians and all politicians, and restates the importance of the independence of the central bank from politics,” he said.

Not harmful, not helpful

Some political experts don’t see publicly lobbying the Bank of Canada as harmful.

“I don’t see it as particularly negative,” said Gerald Baier, associate professor of political science at the University of British Columbia.

“Obviously, the Bank of Canada collects information, collects data that helps make its decisions. But it’s not hurting anyone for them to write a letter that says, ‘Here’s what’s going on and here are the negative effects of of continued interest rate hikes.'”

Baier also suggested the premiers’ actions are mostly about political optics and the only ones they’re helping are themselves.

 

Three premiers urge Bank of Canada to halt interest rate hikes

 

Desjardin chief economist Jimmy Jean and Centre for Future Work director and economist Jim Stanford look ahead to tomorrow’s central bank rate announcement after premiers Eby, Ford and Furey called for a pause.

“It’s a political exercise in those premiers taking the chance to sort of stand up for regular folks in their in their provinces,” said Baier.

“A lot of the audience is not the Bank of Canada but voters who would look at their premiers and say, ‘You gotta be doing something more to influence this policy.'”

The NDP’s Jagmeet Singh was the first federal leader to wade into the debate this week.

“The Bank of Canada’s approach is not working — in fact, it’s creating more pain for people,” Singh told a recent news conference in B.C.

“Grocery prices are extremely high and the cost of housing remains really high. How has the Bank of Canada made people’s lives better? By taking on inflation when grocery prices continue to rise and housing is still completely unattainable for people.”

 

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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