Fourteen bidders have passed the first hurdle in their race to vie for valuable chunks of public airwaves when the federal government auctions them off in January.
Industry Canada released a list of companies that are “provisionally qualified” to participate, a week after revealing that a Toronto private equity firm had withdrawn from the 700 megahertz auction. The final bidders list will be published Nov. 8.
Ottawa’s failure to attract a large foreign carrier to the auction has created doubt about its strategy to encourage more competition in the $20-billion wireless market. The government has said it wants to ensure there are at least four carriers in every region, but there are doubts about how many new entrants have the money to fund the remainder of their down payments in the auction, not to mention compete with more entrenched players.
“We view the list of provisionally qualified bidders as neutral for the wireless stocks,” said Drew McReynolds, an analyst with RBC Dominion Securities Inc., in a research note to clients.
Industry Canada, meanwhile, took another stab at clarifying the auction’s anti-collusion rules late Tuesday. Bidders and their affiliates are banned from discussing mergers and acquisitions until final payments for spectrum are made next year. But not all talks are prohibited. Specifically, “discussions regarding the beneficial ownership of a bidder that do not involve another bidder or its affiliates or associates (for example, discussions with an entity that is not related to any other bidder) are permitted until 10 days prior to the start of the auction.”
In that regard, Industry Canada determined on Sept. 28 that Feenix Wireless Inc., a new company that lists entrepreneur John Bitove as its CEO, “was not affiliated” with Data and Audio Visual Enterprises Holdings Inc. (the legal name for Mobilicity) and its subsidiaries “at that point in time.” Mr. Bitove is also executive chairman of Mobilicity.
Last week, Industry Canada announced that private equity firm Birch Hill Equity Partners Management Inc. had withdrawn its application for the auction. Birch Hill, which applied to bid as BH Wave Acquisition Corp., put down an initial deposit in mid-September. It has declined comment on its reasons for pulling out of the process.
Its departure, however, shortened the auction’s applicant list to 14 – a development that was seen as a boon for the Big Three wireless carriers (Rogers Communications Inc., BCE Inc. and Telus Corp.) because they now face one fewer competitor for prized spectrum.
Bidders face a noon deadline on Oct. 29 to submit the remaining 95 per cent of their deposits. Although they still have the opportunity to withdraw, those in it for the long haul will see those funds tied up until the first round of bidding begin on Jan. 14, 2014. Final payments for spectrum will be due later next year, likely in the spring.