Rogers CEO says fourth carrier not viable

The Globe and Mail

Guy Laurence, CEO of Rogers. (Fred Lum/The Globe and Mail)

Rogers Communications Inc.’s chief executive believes a new cellular carrier would not have the ability to invest in Canada’s capital-intensive wireless market and succeed.

Guy Laurence was careful to note his deference to Ottawa’s wireless policy as he returned to a familiar talking point in his first substantial media briefing since taking charge of the company in December.

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He said while the federal government is keen to pursue the idea of a fourth national carrier and has taken a cue from European markets, countries such as France and Germany have begun to question the workability of four players and favour consolidation.

“Industries such as ours are hugely capital intensive and traditionally in a lot of countries they can support different brands but only three major carrier groups,” he said. “I’m not saying the government is wrong. I’m not saying that they should change their policy. My personal view is that it’s difficult to see a scenario where a fourth carrier could be successful.”

During a discussion with reporters on Friday after the company unveiled a management restructuring, he said smaller competitors don’t have to spend on networks the same way Rogers does.

“Small fry come along and they offer these very glitzy things,” Mr. Laurence said, referencing an unlimited data, talk and text offering from Wind Mobile. “But do they have the technical expertise? Do they have the call centres? Are they going to invest in customer experience like me? I don’t think so.”

The idea of a strong player to challenge Rogers, Telus Corp. and BCE Inc. has dominated industry talk since last summer, when Verizon Communications Inc. eyed the Canadian market.

At the time, then-CEO of Rogers Nadir Mohamed also questioned whether a fourth player could succeed, arguing that Wind Mobile, Mobilicity and Public Mobile – the three wireless-only players that entered the market after the 2008 auction of cellular airwaves – were flailing.

Ottawa rejected the argument then and has since steadfastly maintained that it will not allow the incumbent carriers to acquire spectrum licences earmarked for new entrants.

While Verizon ultimately decided against expanding north, the fallout from last summer’s bruising back and forth between the Big Three and the government has continued as Ottawa has dug into initiatives designed to promote competition.

The Canadian Radio-television and Telecommunications Commission is reviewing the rates large players charge their smaller competitors for wholesale roaming on their networks and in the interim, and the federal government says it will introduce caps on those rates. Wind Mobile has applauded that move and insists it remains a viable fourth player in the Ontario, British Columbia and Alberta markets, although it is facing financing challenges.

The Competition Bureau has filed submissions in the CRTC proceeding that came down hard on Canada’s established wireless players, asserting that the incumbents enjoy “market power” and arguing the industry could be more competitive. The bureau stated in a May 15 filing that there are high barriers to entry not just because of the vast capital costs but also due to the incumbents’ use of long-term contracts, as well as bundling with other products such as television and Internet, which makes it hard for new players to attract subscribers.

Barclays Capital analyst Phillip Huang questioned in a recent research note whether the government’s approach to wholesale roaming rates has been “more bark than bite,” noting that the actual implementation of the wholesale roaming rate caps, expected in June, “will not be very onerous on the Big Three.”

Nonetheless, the incumbents remain wary of crossing Ottawa. The Globe and Mail reported last week that Telus dropped its $350-million takeover bid for Mobilicity, a deal it has repeatedly tried to close despite the government’s strong opposition to it.

The Globe reported in April the federal government threatened to bar Telus from next year’s auction for spectrum licences in the 2,500 MHz band if the incumbent persisted in trying to acquire Mobilicity’s spectrum.

Neither the government nor Telus have formally commented on the company’s decision to withdraw its bid and Mobilicity, which is operating under creditor protection, says a court-ordered mediation continues this week.

Telus’s executive chairman, Darren Entwistle, also took a deferential tone when speaking of Ottawa at an investor conference in Boston last week.

“When I think about the relationship with the government, I think our industry needs to do a better job,” he said. “I think we can develop a more constructive more collaborative and more compromising relationship with the Canadian government.”

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