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Tony Ciciretto, CEO of Ontario's TeraGo.Carlos Osorio/Globe and Mail

A small Thornhill, Ont.-based company says it is on the verge of being the first Canadian operator to sell 5G technology as telecom players, from startups to the Big Three, jockey for position in a race to build the next generation of wireless networks.

TeraGo Inc., which has traditionally catered to the business market by selling connectivity and data-centre services, said it is aiming to enter the residential segment with a plan to deliver high-speed broadband to a handful of urban high-rises this year.

The company is conducting trials of next-generation technology using a trove of licences it has for frequency bands of spectrum (radio waves that carry communications signals) that are emerging as key for 5G services. The potential for 5G technology has boosted the value of TeraGo’s licences and could make the company a target of the likes of Rogers Communications Inc., Telus Corp. and BCE Inc., which do not yet have access to such bands of spectrum.

TeraGo’s push into 5G, which will offer much faster download and upload speeds and carry more data than older wireless technologies, and which will eventually power everything from smart cities to driverless cars, comes as telecom providers around the world spend billions in a bid to gain an edge in a high-stakes competition for smartphone subscribers and the burgeoning Internet of Things market. A Morgan Stanley Research report in 2017 predicted carriers around the world will spend a projected US$225-billion on the 5G rollout by 2040.

TeraGo is looking to take advantage.

“It’s interesting, because we may have the opportunity to be the first 5G player in Canada,” TeraGo chief executive Tony Ciciretto said in an interview. He acknowledged the move might attract attention from much larger competitors that could try to acquire the company or its spectrum. “But right now, we believe there is an opportunity here to leverage this asset, and we’re going to try to grasp it.”

TeraGo considered selling to a foreign investor in 2012, but couldn’t find a suitable buyer. It has since expanded into IT services and acquired a number of data centres. The board hired Mr. Ciciretto in 2016 and he has focused on finding synergies from those acquisitions and improving customer experience at TeraGo’s legacy connectivity business.

The company owns a swath of licences for millimetre-wave spectrum, ultrahigh-frequency airwaves that don’t travel far but can carry huge amounts of data. TeraGo uses it to deliver fixed-wireless internet service to business clients in areas that are not well served by either high-speed cable or fibre-optic broadband options. (Fixed-wireless service works by using radio waves to send signals between a communications tower and a customer’s nearby home or business.)

But TeraGo’s spectrum, some of which it has owned since buying it at public auction in 1999 and some purchased as recently as last year, is in frequency ranges (24 gigahertz and 38 GHz) that are now being considered around the world for use in 5G deployment.

That means it could be valuable not just for fixed-wireless internet service but for mobile cellular use in 5G.

“There’s a scarcity value for us,” Mr. Ciciretto said. He noted that the federal department of Innovation, Science and Economic Development (ISED) plans to hold an auction of millimetre-wave spectrum for 2021. “So there’s a two-year-plus time frame that we have at our disposal.”

TeraGo has antennas on 600 rooftops across Canada to serve its existing business customers and said it can add new radio equipment to those established hubs. It would then connect to potential customers through towers on the top of nearby apartment or condo buildings and use in-building wiring to get to individual units. Mr. Ciciretto said TeraGo plans to connect up to five buildings later this year.

Wireless giant Verizon Communications Inc. amassed a trove of millimetre-wave spectrum in part through its 2018 US$3.1-billion acquisition of Straight Path Communications and used the spectrum to launch what it calls 5G home internet service in four U.S. cities last fall.

Boston-based startup Starry Communications also launched home broadband service last year using rooftop antennas and millimetre-wave spectrum. (Standards for 5G are not formalized and both Verizon and Starry are using prestandardized equipment that includes elements of 5G.)

Only three financial analysts follow TeraGo – which has a market capitalization of around $160-million, 200 employees and 3,000 customers – and all have a “hold” rating on its stock. Spectrum valuation is a large factor in broader uncertainty about the company’s future.

TD Securities analyst Bentley Cross has estimated TeraGo’s spectrum licences could be worth $76-million, but notes there are a number of factors that could push that figure higher or lower.

Those include whether ISED will claw any of TeraGo’s licences back to allow other players to bid for them (as it has done in the past with other spectrum bands) and whether the government will include the company’s 24 GHz spectrum in its auction plan (currently only 38 GHz and 28 GHz spectrum are slated for auction in 2021). Another factor is whether a large U.S. carrier spends heavily on 24 GHz spectrum in an upcoming auction south of the border, which could increase the value of TeraGo’s holdings.

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