Craig Wireless dumps Cdn spectrum, kills WiMax dream

Howard Solomon

15 years ago

Debt-laden Craig Wireless Systems Ltd. has sold all of its Canadian wireless spectrum just a month after saying its new moblie WiMax network in Vancouver would soon be in service.

The sudden announcement came Friday morning in a press release, which said the Winnipeg-based company headed by brothers Drew and Boyd Craig had sold the spectrum for $80 million to the Inukshuk consortium. Inukshuk is a partnership between BCE Inc.’s Bell Canada and Rogers Communications Inc. to bring wireless broadband to underserved areas of the country. The sale is subject to regulatory approval.

It’s unclear what will happen to Craig Wireless’ fixed wireless Internet business in Winnipeg and Vancouver, which it deperately wanted to upgrade to the speedier mobile WiMax technology to pull in more subscribers. Co-CEO Drew Craig couldn’t be reached for comment Friday morning

“We are very pleased to be able to complete a deal with such great Canadian companies as Bell and Rogers,” he said in a news release. “This sale is very supportive of the company’s strategy to create value for shareholders through a portfolio of spectrum investments,” added Boyd Craig, who is the other co-CEO.

The announcement could mean that Craig Wireless is abandoning Canada. Through subsidiaries, it holds or leases licenses for spectrum in the in California’s Riverside County, where it has said it also is building a WiMax network and in Greece, where it has been involved in a lengthy legal dispute with a partner. The CWS Group also has spectrum interests in Norway and New Zealand.

The Vancouver network was being built by Motorola Canada. It isn’t known how much it will lose by Craig Wireless’ withdrawal from the market. A company spokesman could not be reached for comment.

A hint that Craig Wireless might be changing its Canadian strategy came March 15 when it issued a press release saying it “continues to be in the process of considering its financing options including exploring the possible financing or sale of certain assets, both domestically and internationally.”

Controlled by the Craig family, publicly-traded Craig Wireless has been in financial trouble for years. According to its latest annual financial report, for the fiscal year ending Aug. 31, 2009 the company had a net loss of $10.9 million. On top of that, after an amalgamation of subsidiaries it carried an accumulated deficit of $32 million, bringing the total to just over $43 million.

To prop up the company, in July, 2008 unnamed directors loaned it $9.1 million, with another $2.5 million expected in September. Loans totalling $2.5 million were advanced by the end of the year.

The company has its roots in Craig Media, started by Drew and Boyd Craig’s grandfather, John Craig, in 1948 in Brandon, Man. It which grew into a television and radio station empire. But expansion, including a new station in Toronto, ended with the sale of the radio and TV assets to CHUM Ltd. in 2004 for $265 million. The telecommunications assets became Craig Wireless.

Craig Wireless has operated Internet and wireless television service in Winnipeg and Vancouver for years using a proprietary wireless technology in the 2.5 Ghz spectrum from an equipment manufacturer. It has wanted to upgrade that technology to mobile WiMax, and in interviews the company has blamed some of its financial trouble on the fact that it is using older technology.

To shift to mobile WiMAX, which involves a different spectrum licence than the ones it already had, the company needed Industry Canada permission, which it received in November, 2008.

In September, 2009 it announced Motorola Canada was finally building a WiMax network in Vancouver, the first step in its upgraded Canadian strategy. Last month a company executive said commercial service would start early in the second quarter.

Bell and Rogers didn’t always control Inukshuk. A consortium owned the 2.5 Ghz spectrum, including Microcell Communications. Bell was a partner with another shareholder. Iain Grant, managing director of the SeaBoard Group, a telecommunications consultancy, said their goal was to launch the kind of WiMax wireless service Clear Communications is now building for Sprint-Nextel Corp. in the U.S. to take on incumbents there. However, in 2004 Rogers bought Microcell and its Fido brand for $1.4 billion. That put Bell it in the uncomfortable position of owning spectrum with a competitor. So, with the prodding of Industry Canada, Rogers and Bell took over Inukshuk but limited its goal to using the spectrum only in areas where the two incumbents couldn’t give communities with broadband with their own networks.

Now, Grant says, with the purchase of Craig Wireless’ spectrum Inukshuk has a monopoly on 2.5 Ghz spectrum in the country. What irks him is that Inukshuk runs on a pre-WiMax equipment rather than the latest technology, because, he suspects, Bell and Rogers would rather sell customers their own technology rather than upgrade Inukshuk’s.

For example. Recently, Bell applied to the federal telecom regulator, the CRTC, for permissionto offer its HSPA wireless service to a number of Ontario and Quebec communities instead of service through Inukshuk as planned

“We had a five-year start, if not 10 [on WiMax],” Grant said, “and so far [Inukshuk] has been able to illuminate only 80 communities.”

Grant said the Craig Wireless spectrum sale to Inukshuk means that the upcoming auction of 700 Mhz spectrum – which will be in demand because it’s ideal for broadband-hogging applications like video – should have a set-aside for new entrants to come into the market. Industry Canada did in the 2008 AWS auction, which brought in Wind Mobile, Mobilicity and Public Mobile and others.

Other Canadian telecom companies hold spectrum that could run WiMax wireless services in the 2.3 and 3.5 Ghz. spectrum. One is Primus Canada, an Internet provider which has been experimenting with the technology in Toronto and Hamilton. So far, however, it hasn’t said it will deploy it.