Regina: The Frontier Centre for Public Policy released today Valuation Analysis of SaskTel, a policy study by Ian Madsen, CFA.
In this policy study, Madsen examines a variety of indicators to ascertain the value of the Saskatchewan government-owned SaskTel. Madsen follows well-established practices and methodologies that include two different approaches in order to gain an insight into the monetary value of the Saskatchewan Crown corporation.
SaskTel is an historic Saskatchewan institution that has played a role in the development of the province. Established in 1908, communication in those days was not universal and did not always extend to every farm or hamlet. It could be very expensive and often impossible to get a telephone line, and quite expensive to keep one. The Internet, cellular telephony, cable television – even television – had yet to be invented.
Thanks to social, political and technological forces, the circumstances under which the Saskatchewan government created and developed SaskTel have changed dramatically. Now, telephone service is ubiquitous and relatively inexpensive, and so is Internet service. There is also a wide array of options for television service: broadcast, cable, satellite or over the Internet.
Over time, the Canadian federal government and other provincial governments have extricated themselves from direct ownership of various commercial enterprises. SaskTel is one of only a few such enterprises that remain government hands.
In the paper, Madsen carefully compares SaskTel with other financial companies of similar size and nature that are publicly listed and traded. He estimates a Market-Based valuation of SaskTel at between $2.055 billion and $2.147 billion and also estimates an Intrinsic (Discounted Free Cash Flow) valuation at between $0.662 billion to $0.883 billion.
“This valuation of SaskTel offers crucial information to Saskatchewan policy makers and the public at large, that may be used to assess the opportunity costs of keeping SaskTel in its present form. Concerned Saskatchewan taxpayers can now more accurately weigh up what they are currently forgoing, in terms of provincial programs and services, for the sake of retaining ownership of SaskTel,” writes author Ian Madsen.
Knowing the value of SaskTel provides citizens with the necessary information to make decisions about the future of SaskTel. In economic terms, there is a real cost to the Saskatchewan taxpayer in retaining SaskTel in the hands of its government.
“Ultimately, it will be up to Saskatchewan voters to decide on SaskTel’s fate. We hope only to spark a debate on whether the present ownership structure of SaskTel best serves the people of the province or if the financial resources currently locked in to the Crown Corporation could be utilized in a more efficient way,” concludes Mr. Madsen.
A copy of Valuation Analysis Of SaskTel is available for download here.
For more information or to arrange an interview with the study's author, media may contact:
Ian Madsen, CFA
PHONE: (778) 593-9180
EMAIL: icmadsen@telus.net
ABOUT THE AUTHOR:
Ian Madsen is an investment and financial analyst based in Surrey, BC. He earned a BA in Economics from the University of Alberta and an MBA in Finance from the University of Toronto. He has managed institutional investment portfolios, lectured at colleges, managed investment research operations, and developed financial valuation models. For several years Ian was vice president at a U.S. investment research firm with extensive operations in India, where he worked and managed staff. He also ran his own investment counseling firm and advisory newsletter. He holds the Chartered Financial Analyst (CFA) designation and is a former president of the Saskatchewan and Edmonton CFA Societies.
