Belus?

Curiouser and curiouser.  Looks like the Bell Canada-Telus merger speculators are making their case. I had also hinted at this possibility, though admittedly not too seriously, in an article last week.

In my article I drew attention to the gutting of the more forward-looking technology teams at Bell Canada and how that might very well signal a merger with another large telecom company; it's difficult to remain independent once you've significantly impaired your future options.

If this Belus speculation has any validity I now have to wonder if George Cope and the board already came to the conclusion months ago that the privatization deal would fail given the historically poor credit market. That could explain some odd tactics on Bell's part.

Before you jump to this conclusion and rush out and buy BCE shares, think very carefully. Consider the possibility that BCE's share price will not budge even if the offer price is far above the $25 or so its shares are trading for today. Look at what happened to Teck Cominco when the market came to understand the implications of the debt they needed to take on to acquire Fording Coal. Then there is HudBay Minerals' offer for Lundin Mining. Teck and HudBay stock crashed and burned; Lundin stayed put at first, then continued to fall in the commodity meltdown.

Telecom and mining are hardly similar businesses yet these mergers require the same thing - debt, and lots of it. Investors, having been burned once are turning shy. This may be a poor time to speculate on a Bell Canada-Telus merger.