Bruce Telecom to be converted to a municipal services corporation

Bruce Telecom will be converted to a municipal services corporation from the current municipal services board by the end of this year.

Owned by the Municipality of Kincardine, the company was the subject of a special meeting Monday night (April 11) to discuss its 2015 financial results and the 2016 operating and capital budgets, as well as a new governance model.

Holly Robinson, chairperson of the Bruce Telecom board, spoke briefly to council and introduced the board of directors which also includes Tom Cole, Tom Scott, Peter Risteen and Ron Larsen.

President and chief executive officer Bart Cameron then outlined the financials and proposed budget, noting that Bruce Telecom ended 2015 in a strong financial position.

"Our cash position remained strong with a balance of $4.1-million," he said, "and capital projects of $5.5-million completed as per plan, with another $500,000 in capital to be completed in 2016. It was a tough, challenging year. But  our revenues were higher than expected, and we provided a high-quality product to our customer."

Cameron said the actual surplus for 2015 was $2.17-million, up from $1.5-milion in 2014, and higher than the $1.3-milion that was budgeted for 2015.

Turning to the 2016 budget, he said the major focus will be on Internet and television, and pointed out that there is continued pressure from competitive forces within the industry, plus many people are opting to have just cellular service without a land-line telephone.

For 2016, operating revenues are set at about $18.4-million, he said, with cost of service and sales at $3.7-million, leaving an operating margin of $14.7-million. Operating expenses are budgeted at $10.4-million, leaving an income before amortization of $4.2-million. With amortization set at $2.8-million, the income after amortization is $1.4-million.

Cameron said the capital plan is to spend another $6-million this year, with $1.7-million on the plant and equipment; $530,00 on network, $695,000 on building, IT and general expenses; and $3-million on construction. The capital budget is funded from operations and existing cash reserves.

The Bruce Telecom board requested council approval of the operating surplus of $1,415,000, and the capital budget of $6-million for 2016. This year's dividend to the municipality will remain at $600,000, the same as 2015.

During the closed session that followed, council discussed an updated governance model for the company, with the assistance of Mark Rodger, of the law firm Borden Ladner Gervais, who has been advising council and the board on corporate and structural options for the business.

Upon returning to open session, council approved the Bruce Telecom 2016 operating and capital budgets, as presented, and agreed to initiate the process to convert the current Bruce Telecom municipal services board format to a municipal services corporation pursuant to the Ontario Municipal Act and pertinent regulations.

“We are pleased to see the municipality has decided to retain the business following the aborted asset sale to Eastlink," said Robinson. "Moving to a municipal services corporation will enable the Bruce Telecom board and the senior management team to operate in a more robust and agile fashion. The current set-up as a municipal services board acts as a constraint in this highly-competitive and rapidly-evolving telecommunications sector.”

"Since the decision was taken a year ago to keep and support the enterprise," said mayor Anne Eadie, "we believe this is the best solution to equip the business to manage its affairs and position itself for success, with the bottom line consideration of a sustained financial return to the ratepayers of the Municipality of Kincardine.”

The process, which is expected to be completed by the end of the year, includes a public consultation requirement, details of which will be announced at a later date.