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The federal court has dismissed Telus Corp.’s T-T request to block Quebecor Inc.’s QBR-A-T purchase of 5G airwaves in Western Canada that are critical to the Montreal-based telecom’s national expansion plans.

Quebecor’s Videotron Ltd. subsidiary spent $830-million to acquire 294 blocks of spectrum in last year’s federal auction, with more than half of its investment going to Ontario, Alberta, Manitoba and British Columbia – provinces outside of its home market of Quebec. The airwaves in question are in the 3,500-megahertz range, which is beachfront property for the delivery of 5G wireless services.

The Montreal-based telecom has said it plans to expand beyond Quebec either by acquiring Shaw Communications Inc.’s Freedom Mobile, which is up for sale as part of Rogers Communications Inc.’s takeover of Shaw, or by becoming a mobile virtual network operator, or MVNO. Under Canada’s new MVNO framework, companies looking for guaranteed access to national wireless networks must own spectrum in the areas where they wish to provide service.

During last summer’s blockbuster spectrum auction, Ottawa set aside up to 50 megahertz of spectrum for smaller carriers in certain areas in order to encourage competition. Videotron, which offers telecom services in Quebec and Ontario, was permitted to bid on the set-aside spectrum, allowing it to purchase the spectrum at lower prices than what the three national carriers – BCE Inc.’s Bell Canada, Telus and Rogers Communications – paid for similar slices.

In rejecting Telus’ application, Justice Alan Diner said the Industry Minister’s decision to allow Quebecor to bid on the set-aside airwaves was reasonable and in line with Canada’s spectrum auction framework, which outlines pro-competitive measures such as set-asides. Bell and Telus have blamed set-asides for driving up their costs in last year’s record-breaking, $8.9-billion auction.

Vancouver-based Telus filed an application for judicial review last August seeking to block Quebecor’s purchase of spectrum in Alberta, Manitoba and British Columbia. Telus argued that the Montreal-based telecom did not meet the requirements to bid on those blocks of spectrum because the telecom is not “actively providing commercial telecommunications services to the general public” in those regions, as required by the auction rules.

Videotron was deemed eligible by Innovation, Science and Economic Development Canada, or ISED, on the basis of services provided by its affiliate, Fibrenoire Inc., which provides businesses with fibre-optic connectivity services. Videotron bought Fibrenoire for $125-million in 2016.

Justice Diner awarded Videotron costs, stating in written reasons released this week that Telus “has not provided a basis for the court to intervene.” The telecom simply prefers a more restrictive interpretation of the auction rules than the one that the government has chosen, Justice Diner wrote.

“This judicial review is not the first time that Telus has opposed a pro-competitive interpretation or application of the eligibility criteria,” Justice Diner wrote. However, despite Telus’ previous objections, the Industry Minister “decided to proceed largely as initially proposed with respect to the set-aside auction, framed by the objective of increased competition,” he added.

Representatives of Telus did not immediately respond to a request for comment on the federal court decision. A spokesperson for Quebecor declined to comment.

The Globe and Mail previously reported that Rogers entered into negotiations with Quebecor regarding Freedom Mobile this month, just as the Competition Bureau moved to block Rogers’ takeover of Shaw. If Quebecor’s attempt to buy Freedom is unsuccessful, it could pursue a national expansion by leasing network capacity from the national wireless carriers.

The Canadian Radio-television and Telecommunications Commission ruled last April that Bell, Telus, Rogers and SaskTel must sell network access to eligible regional competitors. The regional competitors can then use the profits from reselling wireless services to build their own infrastructure, which they must do within seven years.

The CRTC is still finalizing the terms and conditions associated with the MVNO framework.

Quebecor chief executive officer Pierre Karl Péladeau praised recent regulatory decisions, including the new MVNO regime, at a conference held by the Canadian Chapter of the International Institute of Communications in Ottawa on Monday.

During his speech, Mr. Péladeau criticized what he called the “oligopoly” of Bell, Telus and Rogers, arguing that Videotron is responsible for lower cellphone bills in Quebec.

However, during Question Period on Wednesday, NDP Leader Jagmeet Singh described Quebecor as “another billionaire company,” arguing that allowing the Rogers-Shaw merger to go through with a divestiture of Freedom Mobile to Quebecor would still result in layoffs and higher cellphone bills.

Prime Minister Justin Trudeau responded that the federal government is prioritizing consumers in its review of the transaction. The takeover still requires the approval of the Competition Bureau as well as ISED, while the CRTC has approved the deal with some conditions attached.

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