Ottawa will likely slam the door again on Telus Corp. if it continues to ask permission to buy financially struggling wireless startup Mobilicity, Industry Minister James Moore has hinted.
In a conference call Thursday with reporters from San Francisco, where he met Silicon Valley-based Canadian entrepreneurs and officials from Microsoft, Facebook and Twitter to drum up investment here, Moore noted the government hasn’t changed its policy on not allowing incumbent carriers like Telus to get hold of spectrum from competitors that would change the balance of competition.
Announced last year, the policy states that competition will be a factor when the government decides to approve or deny spectrum transfers.
“We want there to be more competition in the wireless sector,” Moore said. Then he pointedly noted that Telus’ application for federal approval to buy Mobilicity has been refused before. “Our (spectrum transfer) policy remains unchanged,” he repeated.
He added that policy applies to AWS spectrum auctioned in 2008 – which is capable of running current 4G wireless LTE technology – the just auctioned 700 MHz spectrum and frequencies that will be sold next year in the 2500 MHz auction.
He didn’t say, but that list doesn’t include the older PCS spectrum own by startup Public Mobile. The government allowed Telus to buy it.
Moore added he will make a decision on Telus’ new offer to buy Mobilicity soon. In its latest bid, which has to be approved by a judge, Telus (TSX: T) has offered $350 million for the carrier. Telus hasn’t said it has made an request yet to Ottawa for approval.
UPDATE: Friday’s Globe and Mail quotes an unnamed government source saying Ottawa may get back at Telus by cutting it out of next year’s 2500 MHz auction if it keeps pursing Mobilicity and its valuable AWS spectrum.
The preliminary auction rules are tailored to put a cap on Bell Mobility and Rogers Communications, which already have a lot of 2500 MHz spectrum. As a result the auction would tilt towards Telus. But the Globe says the government doesn’t want incumbents getting hold of more AWS spectrum than they already have.
“If companies like Telus think the government will allow them to stockpile (AWS) spectrum that was set aside for a fourth player, and access new spectrum in future spectrum auctions, they are kidding themselves,” a federal government source said.
Moore’s press secretary Jake Enwright refused to comment on the report.
Dvai Ghose, research director of Canaccord Genuity, said in a note to investors that the government hints of changing auction rules are “bizarre … We do not see how constantly changing rules including set aside provisions and bidding eligibility helps attract capital for new entrants.”
On the conference call Thursday, Moore refused to comment on a report from Scotia Capital that Industry Canada has a policy of trying to force Wind Mobile and Mobilicity to merge. According to telecom analyst Mark Goldberg, a Scotia financial analyst wrote to investors that “we believe IC is determined to devalue Wind and Mobilicity to the point that it becomes attractive for consolidation.”
As for his California trip, Moore said the government’s recently-announced Digital 150 strategy includes $500 million available from the Business Development Bank for venture capital for information technology and communications companies, and to help SMBs adopt digital technologies will be a “big source of interest” to U.S. companies looking north. There’s also $100 million more for the federal accelerator and incubator program.
“In Silicon Valley terms it’s not the billions that are frequently talked about in terms of opportunity,” he added, but said its a significant sum for a market of 35 million.
He also mentioned that U.S. companies also talk about Canada being a tremendous source of IT talent.
Some firms he spoke to — including Google — are also interested in Ottawa’s strategy of putting up hundreds of millions of dollars ensure most rural residents here have access to one Internet providers offering download speeds of at least 5 Mbps. Google is a fibre optic Internet provider offering speeds of 150 Mbps in three U.S. cities and is having discussions with over 30 others.
“They didn’t make any commitments,” Moore added, “but their appetite to look to Canada in ways people may not expect is something I was very pleased to hear.”