Quebecor Inc. is likely the next regional cable company that will strike a deal to eventually sell some of its unused wireless spectrum, predicts a new analyst report.
Last week, Shaw Communications Inc. announced an agreement to sell Rogers Communications Inc. an option to ultimately purchase its undeployed AWS (Advanced Wireless Services) wireless licences in late 2014 – a deal that is now raising the ire of consumer advocates and at least one rival mobile carrier.
That option agreement is designed to keep Shaw and Rogers from breaching Ottawa’s five-year ban on incumbents purchasing the new entrants’ spectrum to ensure marketplace competition. Even so, Scotia Capital analyst Jeff Fan argues that Quebecor’s Vidéotron Ltée division is well poised to make a similar move with some of its AWS spectrum licences.
“Shaw agreed to sell an option to Rogers Communications Inc. to purchase its Advanced Wireless Services (AWS) licences beginning in September 2014,” Mr. Fan wrote in his latest Converging Networks report.
“We expect Quebecor will eventually do the same with its unused licences in Toronto.”
Montreal-based Quebecor spent $554.5-million on AWS spectrum during the last federal government auction in 2008. While the bulk of that spectrum covers the province of Quebec, it also spent $96.4-million on a small block of spectrum in the Toronto area that covers a population of 5.6 million, according to Industry Canada’s website.
Last September, Quebecor’s chief financial officer, Jean-François Pruneau, confirmed that his company has no plans to build a mobile network in Toronto with that 10 megahertz of spectrum.
He also noted that while Quebecor is prohibited from selling its AWS spectrum to a wireless incumbent like Rogers, BCE Inc. or Telus Corp. until 2014, it had nonetheless received “inquires” about that spectrum.
“The value of the spectrum has certainly not been impaired over time. And in fact, I think it has increased since we acquired it,” Mr. Pruneau said at an investor conference at the time.
Last week, Rogers’ chief executive officer Nadir Mohamed declined comment when asked whether his company is mulling other deals to buy new-entrant spectrum.
Industry sources have said that Rogers has approached Amsterdam-based VimpelCom Ltd. regarding an eventual purchase of the spectrum held by its Toronto-based carrier Wind Mobile Canada. Both Rogers and VimpelCom have declined comment on the matter.
Late last week, Wind founder Anthony Lacavera announced that he planned to resign as CEO once his buyout deal was finalized with VimpelCom’s subsidiary Orascom Telecom Holding SAE.
“We expect his [Lacavera’s] former partners from Wind to join him shortly, leaving little local management capabilities at Wind Mobile Canada, which we believe positions it for an ultimate sale by VimpelCom Ltd.,” Mr. Fan said in his report. “... We think the likely buyers will be the incumbents.”
Such an outcome, however, would run counter to Ottawa’s efforts to create competition in the $19-billion wireless industry. Already, the Shaw-Rogers option deal is prompting sharp criticism from consumer advocates.
On Tuesday, five groups, including the Public Interest Advocacy Centre, the Consumers’ Association of Canada, OpenMedia.ca, the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic, and the Council of Senior Citizens Organizations of British Columbia, wrote a letter to Industry Minister Christian Paradis demanding that he “prohibit” Rogers from ultimately buying Shaw’s spectrum.
“We are all of the view that such a proposed sale runs contrary to the original AWS auction rules of the set-aside and, most importantly, contradicts your ministry's clear policy to preserve that spectrum for new wireless entrants,” the groups wrote in their letter.
“The Shaw-Rogers announcement seeks to return that spectrum to an incumbent wireless provider, in conflict with both the letter and spirit of the AWS auction rules. This brazen announcement in our view should immediately be countered by your ministry. We call upon you to assure Canadian wireless consumers that this government is committed to advancing real competition that lowers prices and increases consumers’ choices of wireless providers.”
Simon Lockie, Wind’s chief regulatory officer, said the carrier has filed its own complaint with Ottawa about the Rogers-Shaw option agreement: “Wind Mobile considers the announced deal a clear violation of the AWS spectrum policy and we have written a letter to Industry Canada and the Minister expressing our concerns. We have every confidence that Industry Canada will deal with this violation swiftly and firmly.”
Despite the federal government’s years-long desire for sustainable wireless competition, Mr. Fan argues that Canada, which has a small population that recently topped 35 million, is simply “not large enough” to support a fourth wireless carrier.
As a result, he suggests that the federal government has limited options even if it ultimately blocks Rogers from purchasing Shaw’s spectrum and prevents any of the big three incumbents from striking similar deals with new entrants like Quebecor, Wind or Mobilicity.
“It may do this just to prolong its ‘fourth operator’ dream. But blocking Shaw’s and Quebecor’s transfers will leave the licences unused, which is not efficient,” Mr. Fan added.