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A group of tech-savvy U.S. investors that grabbed a slice of wireless spectrum nobody else wanted in the Ottawa's auction this summer has hired a former head of Bell Mobility to launch a discount cellphone service.

The company plans to offer an unlimited voice and text wireless service, with simple billing and no contracts, for $40 a month in Ontario and Quebec by the third quarter of 2009, said Alek Krstajic, chief executive officer of BMV Holdings.

Mr. Krstajic, who served as president of BCE Inc.'s Bell Mobility in 2005 and also held senior positions with Rogers Communications Inc., says the incumbents are overserving the high-end market with fancy smart phones that surf the Web and play videos.

He thinks his company will be able to attract about two million subscribers over the next few years by selling a no-frills service that discards cameras and e-mail for simplicity and predictable pricing.

BMV's strategy centred on buying spectrum licences covering the most populated part of the country for a fraction of what other bidders spent. The firm spent $52.4-million to reach about 19 million people. In comparison, Globalive Communications Inc., another new entrant planning a discount brand, spent $442.1-million for licences covering almost 26 million people.

“We didn't blow our brains out on spectrum,” Mr. Krstajic said. And that leaves BMV in an enviable position of being able to get to market for less money than anyone else, he argues.

The challenge for the firm is that the spectrum it has secured, called “G-band,” will require special cellphones and network equipment – the key reason no other bidder pursued it.

Both Qualcomm Inc., which makes chipsets for cellphones, and Nortel Networks Corp., which makes network gear, say they have equipment that can support G-band, Mr. Krstajic said.

Iain Grant, managing director of SeaBoard Group, a telecom consulting firm, said he thinks BMV will be able to get cellphones made by factories in China and bring them to market for less than $100.

“We think that these guys were the smartest guys in the room,” he said of BMV's investors.

“I would not say we are smarter, but we are very experienced in dealing with new spectrum and the issues around developing the equipment, the network and handsets,” said Harry Hopper, a partner at Columbia Capital in Alexandria, Va., one of the principal financial partners of BMV.

The investment firm made bets on new spectrum auctioned in the U.S. two years ago, called AWS, and is also investing in satellite-to-terrestrial communications that uses new spectrum.

Other U.S. investors include M/C Venture Partners, Charles River Ventures, Rho Ventures and Ignition Partners. Canadian partners include Rho Canada in Montreal and Kensington Capital Partners in Toronto.

Ownership structure will be kept within the foreign content limits set by Industry Canada, said Mr. Krstajic, who is convinced there is substantial pent-up demand in Canada for a no-frills service.

Canadians living paycheque to paycheque need predictability in their monthly billing and they aren't in a position to sign three-year contracts. They are also tired of paying for features they don't need, such as the ability to roam around the world when in fact they never leave the city, he said.

Mr. Krstajic, who developed a discount service within Bell Mobility that was never launched, says flat-rate billing will minimize demands on customer support. He wants to try to run the company with a staff of less than 100.

BMV is copying a business model that has proved successful in other parts of the world, said Dvai Ghose, an analyst with Genuity Capital Markets.

In the U.S., for example, MetroPCS Communications Inc., a low-cost wireless operator based in Dallas, added 249,000 subscribers in the third quarter, bringing its total customer base to 4.8 million.

But numerous challenges confront the Canadian startup, including developing a brand, establishing a distribution network and sourcing all the specialized equipment, Mr. Ghose said.

“Either it was the sale of the century, or [BMV] bought bad spectrum,” he said.