The Harper government’s hope that foreign telecom carriers will see this country as an opportunity for wireless investment is evaporating.
Industry Canada this morning released the list of approved bidders for January’s auction of spectrum in the 700MHz band, and there are no foreign carries or companies there.
Nor are small startup Public Mobile, whose network covers the Greater Toronto area, Montreal and Ottawa, nor financially-troubled Mobilicity, whose parent company is DAVE Wireless.
However, Mobilicity chairman John Bitove has made the bidder list with a company called Feenix Wireless Inc., along with two Canadian private equity firms which may have foreign investors. One of those equity firms is Catalyst Group, a major holder of Mobilicity bonds.
As expected, bidders include BCE Inc.’s Bell Mobility, Rogers Communications, Telus Corp., Wind Mobile’s parent Globalive Wireless Management, Quebec’s Videotron, Bragg Communications (parent of recently-launched Eastlink wireless), Manitoba’s MTS Inc. and SaskTel. Thunder Bay, Ont., incumbent phone company TBayTel is listed, as is Vancouver’s Novus Wireless, which bought PCS spectrum in the 2008 auction but has yet to open a network.
New names on the list include
— BH Wave Acquisition Corp., owned by Toronto’s Birch Hill Equity Partners. Birch Hill has been rumoured to be eyeing an investment in Wind. Wind’s financial backer, Amsterdam-based VimpelCom Ltd., is looking to sell or reduce its shares in the Canadian division.
–Toronto’s Catalyst Capital Group , led by Newton Glassman.
Also on the list are a number company from Alberta which owns Corridor Communications, and British Columbia wireless carrier equipment maker Vecima Networks.
The list doesn’t say where they will bid. It also isn’t the final list. These companies have only put down a five per cent deposit on the opening bids for spectrum in the regions they are interested in. The rest of the deposits are due Oct. 29. Anyone on the list can pull out before that and get their deposit back.
The lack of a big international carrier showing any interest in bidding is a win for the country’s big three incumbents – Bell, Rogers and Telus – wrote Ghose. Bell and Telus in particular were part of a vocal campaign against Industry Canada policies for the auction which they said would favour U.S. giant Verizon Communications should it take over Wind Mobile. Ultimately Verizon decided to take a pass on Canada.
“Surely now the government realizes that the market will not support four carriers per market and must rethink its failed wireless policy,” Ghose wrote.
Ghose also noted that it isn’t clear how much money Wind will have for bidding on spectrum.
Interestingly, over the weekend the government ran full-page ads in many Canadian newspapers which could be interpreted as a warning it may take a bigger hand in the cellular industry. “The fact is Canadians pay some of the highest wireless rates in the developed world,” the ad says in part. “And our largest wireless companies hold 85 per cent of the airwaves.”
In his research note Ghose acknowledged that the stock market may “fear (federal) micromanagement including in areas such international roaming tariffs and domestic wholesale tariffs for new entrants, we are not overly concerned.”
The Canadian Radio-television and Telecommunications Commission (CRTC) has a hands-off policy on regulating wireless rates, he noted. If it wanted to change that it would have to hold a consultation that could take as much as 18 months.
And despite the fact that the CRTC has started looking into roaming rates, Ghose also believes it may find rates here “are not particularly egregious compared with other countries, especially as the incumbent carriers have been slashing roaming rates.
“While the Government could slash domestic wholesale roaming rates for new entrants through tariffs, it is not at all clear which new entrants, with the exception of Quebecor and EastLink, stand to benefit as the survivability of Wind, Mobilicity and Public Mobile appear questionable.”
Foreign carries may be waiting to see the fall-out from the auction. However, any foreign carriers or investors that want to get into the cellular business in this country will have to wait until after the auction has finished, likely in late February or March. Under the auction rules the financial structure of bidders – including mergers or acquisitions — can’t change until the auction is over.
Dvai Ghose, head of research at Canaccord Genuity, wrote in a note to investors this morning that there had been speculation that Britain’s Vodafone or Norway’s Telenor Group were interested.
But he said the list must be “a key disappointment for the government, which wants four carriers in every region in every market.” This, he noted, “despite the fact that the government bent over backwards to find foreign carriers to act as new entrants” by changing telecom investment rules last year.
Under the changes a foreign company can buy all of a Canadian spectrum-holding cellular company that has less than 10 per cent of the market.