Rogers again challenges Ottawa with Videotron deal

Howard Solomon

11 years ago

The country’s biggest wireless carrier has again poked its finger in the eye of the federal government by signing another option deal to buy spectrum from a new entrant carrier before a ban is lifted.

Rogers Communications Inc. said Wednesday it has struck deal for an option to buy AWS spectrum covering Toronto held by Quebec-based carrier Videotron for $180 million. That’s just under twice the $96.4 million Videotron paid in 2008.

It’s part of a larger 20-year pact to jointly expand Videotron’s LTE network in that province and give Rogers a greater presence there.

Videotron spent a total of $554.4 million on AWS frequencies in Ontario and Quebec in the 2008 spectrum auction, spectrum that was set aside for new entrants to encourage competition. It used the Quebec portion to build a network there, but left the Toronto spectrum untouched, saying it had no plans to expand its network outside the province.

One of the conditions of AWS spectrum set aside for new entrants – such as Wind Mobile and Mobilicity – is that incumbent carriers like Rogers can’t buy it for five years after they got their licences. Videotron’s ban ends Jan. 1, 2014.

Earlier this year Rogers struck a similar option deal with Shaw Communications, which also bought spectrum as a new entrant in 2008.

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The Shaw deal is now being reviewed by Industry Minister Christian Paradis. Rogers argues it hasn’t violated the conditions of the AWS spectrum rules, saying its deals are options to buy, not an actual purchase.

However, critics including Wind Mobile say the Shaw deal is merely a way to stifle competition.

The Videotron spectrum deal is sure to be reviewed by Paradis along side the Shaw deal.

The Rogers announcement was careful to say it is subject to regulatory approval.

Rogers isn’t the only carrier trying to get at spectrum of new entrants before the ban expires. Telus Corp.’s would get control of Mobilicity’s AWS spectrum if its proposed $380 million purchase of the startup is approved.

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Under the LTE network agreement, Videotron and Rogers will pool their efforts to quickly build out and operate a shared LTE wireless network that expands on the Quebec carrier’s existing effort. Videotron said one advantage of the deal is it will expand LTE coverage to areas outside Quebec’s major cities.

Rogers already has LTE service in Montreal, Quebec City and Ottawa. The deal lets its brand be carried in more cities across Quebec while allowing Videotron to expand its LTE network faster than planned.

In 2011 it announced a partnership with Mantioba Telecom Services to jointly build an HSPA+ network in that province.

In a statement Rogers CEO Nadir Mohamed said the agreement with Videotron “will benefit businesses and consumers and is part of Rogers focused, strategic game plan.”

“This network and spectrum sharing agreement, combined with the expansion of our LTE footprint, will allow even more consumers to experience the superior connectivity and incredibly fast speeds that LTE delivers.”

Robert Depatie. CEO of Videotron parent Quebecor Inc. said the deal enables Videotron to build its LTE network farther and to do it faster than planned.

The deal also comes on the eve of next month’s deadline for carriers to put money down for the upcoming auction of valuable spectrum in the 700 MHz frequencies. By sharing a network build both companies save money that can be put into the auction.

As part of the agreement, Rogers [TSX: RCI.B] and Videotron will each provide each other with services for which Rogers will receive $200 million and Videotron $93 million over 10 years.