Quebecor Inc. has made a $233-million play on Canada’s wireless industry – buying valuable wireless spectrum in the country’s four most populous provinces – though it is saying little about how it intends to use it.
Ottawa was quick to hail the Montreal company as a new national player after it emerged from a federal auction with a number of wireless licences with which it could compete in Ontario, Quebec, Alberta and British Columbia – four provinces that account for 86 per cent of the country’s population.
But sources say the company is unlikely to launch a national carrier without first getting concessions from Ottawa. Other companies that have tried to take on the Big Three have found it impossible to make money in the face of tough competition from BCE Inc., Telus Corp. and Rogers Communications Inc. Quebecor will likely demand that the government give it secure roaming rights on rivals’ networks and use of their towers at a fixed, low cost.
Ottawa announced long-awaited results of the 700-MHz spectrum auction Wednesday, awarding 20-year licences for the use of extremely valuable airwaves that are particularly suited for handling growing demand for downloading data on tablets and smartphones. This band carries signals over longer distances with fewer cell towers and is better able to penetrate buildings, elevators and underground parking garages.
The federal government said it reaped nearly $5.3-billion after more than 100 rounds of bidding – more than it has ever received before in a spectrum auction and far exceeding analysts’ estimates. The market had anticipated it would fetch less than $2-billion.
Federal Industry Minister James Moore hailed Quebecor’s bid as a victory for his government’s efforts to encourage more competition in the $20-billion market cellular market.
“I think it’s great they’re looking beyond their traditional footprint in the province of Quebec to provide my home province of B.C., Alberta and the province of Ontario with a fourth player option,” Mr. Moore said,
Quebecor’s Vidéotron unit secured a prime block of 700-MHz spectrum in Southern Ontario and Eastern Ontario. It also won prime blocks in Alberta, B.C. and Quebec. Prime blocks are those for which there is already technology available to employ the spectrum.
Mr. Moore, who had publicly argued with the Big Three incumbents over Ottawa’s rules to encourage more competition, sounded a triumphant note.
“The outcome of the auction supports more choice for Canadians by enabling a fourth wireless player in every region of the country. There are those who doubted whether or not this would be realized in this auction,” he said.
“Those doubters have now been silenced.”
Bidding went 108 rounds and the Big Three acquired prime spectrum in all provinces.
“With the high-quality frequencies acquired in this auction, Vidéotron is now well-equipped to develop its network in the years to come and to continue offering its customers the best in wireless technology,” Robert Dépatie, president and chief executive officer of Quebecor Media, said in a press release.
“Given the way the auction unfolded, Quebecor Media could not pass up the opportunity to invest in licences of such great intrinsic value in the rest of Canada,” Mr. Dépatie added.
“We now have a number of options available to us to maximize the value of our investment.”
Quebecor did not elaborate on what those options are as the Quebec-based telecom company goes national. Spokesman Martin Tremblay indicated company officials would not comment any further.
Rogers Communications spent by far the most on spectrum, buying licences for 22 markets in the country at a price of $3.3-billion.
Telus Corp. spent $1.1-billion for 30 licences and Bell Inc. spent $565.8-million for 30 licences.
Rogers secured two blocks of contiguous spectrum in major markets across the country.
“We went into this auction with our customers’ needs front and centre. We believe they want the ultimate video experience and this spectrum will allow us to deliver just that,” Rogers CEO Guy Laurence said.
“Not all 700-MHz spectrum in the auction was the same; we secured the beachfront property we wanted. You either want your customers to have the best for the next 20 years or you don’t.”
The auction proceeds won’t have a significant impact on deficit-strapped Ottawa’s fiscal outlook. That’s because accounting rules require the government to record the revenue haul in increments over the 20 year period of the spectrum licence instead of all at once.
This auction of scarce frequencies will nevertheless shape competition in Canada for decades to come.
There are nearly 28 million cellphone users in this country and Canadians are using ever-increasing amounts of data on their smartphones as they surf the Web or stream mobile video.
The successful bidders are still under a gag order that prevents them from talking to each other or through the media about possible collaboration. This remains in effect until April 2, 2014, the deadline for final payments on winning bids.
Telus vowed to use all of its its 700-MHz spectrum, noting that it has already begun to prep its cell sites for deployment and will be able to use the band to reach more rural customers.
“Today we deliver 4G LTE [fourth-generation long-term evolution service] to 80 per cent of Canada’s population,” CEO Darren Entwistle said “The addition of this 700-MHz spectrum will enable us to expand our LTE coverage into rural areas, extending Telus’s national 4G LTE network to 97 per cent of the population well in advance of the auction’s build requirements. Moreover, the spectrum will enable us to further enhance our coverage in urban areas, adding much needed capacity for our more than 7.8 million customers.”
Bell, meanwhile, confirmed that it plans to pay for its spectrum using “available sources of cash.” It also trumpeted its commitment to provide advanced wireless services to Canada’s North in conjunction with its wholly owned subsidiary Northwestel.
“Bell’s accelerating success in wireless is built on the world’s fastest, most advanced mobile technology, LTE, which is powering next-generation broadband services like mobile TV and an infinite range of new mobile apps and media for consumers and business users,” Wade Oosterman, president of Bell Mobility, said in a release.
(Bell’s parent company, BCE Inc., owns a 15-per-cent stake in The Globe and Mail.)