It seems just a few weeks ago thatÂ Telus’ Darren Entwistle, and BCE’s Michael Sabia announced that they would be converting both their companies into income trusts.Â Share pricesÂ soared at the prospect.Â Income trusts, for those who don’t know, pay out the majority of their profits, with tax favorable treament,Â to unit holders. Designed for business which have no need to invest in future products or technologies, they are best suited for distributing profits of commodities businesses like oil pipelines.
What in the world were the captains of the Canadian communications industry thinking when they announced that the two largest telephone companies in the country would become income trusts; that they would pay out the majority of their profits rather than investing in the future, at a time when the future has never been brighter for this industry?Â Was it nothing more than a cynical manipulation of stock prices?Â Or was it an admission that these businesses are unlikely to be able to compete with the new telecom?Â Either way, it was a singularly visionless act by both parties — a tacit declaration that they have no plan for the future.
Whatever happened to building shareholder value, for goodness sake?
As they say, you can run, but you can’t hide.Â Tuesday, finance minister Jim Flaherty gave them a solid boot in the seat of the pants, announcing that the government would begin taxing trusts.
My suggestion to Darren and Michael?Â Call my friend and fellow blogger Martin Geddes, whoÂ has been preaching for the last two years that value is shifting to the edges of the conversation, and out of the network.Â Tomorrow’s value will come from applications that help people connect before and after the conversation.Â It will come from the business of facilitating conversations between people who want to converse — the kinds of things we’re doing at iotum.Â It won’t come from bit carriage.Â Bit carriage is a dead business.
ButÂ you already knew that.Â You admitted as much aÂ few months back when you lumped the pipeline carrying bits into the same tax status as the pipeline carrying oil.Â