Two of Canada's regional cable companies are being coy about whether they will bid in the federal government's next auction of wireless spectrum, despite having been eager participants the last time around.
Both Quebecor Inc. and Shaw Communications Inc. said Wednesday they remain undecided about partaking in the auction of the valuable 700 MHz frequency next year. Nonetheless, both companies said they consider spectrum a strategic asset, noting they're mindful of the appreciating value of the airwaves that they already own.
Their comments cast some doubt on speculation that wireless new entrants would put aside their competitive differences and form a strategic partnership of regional bidders ahead of the 2013 auction. Such an alliance would ensure that new entrants are able to keep their costs in check while bidding against deep-pocketed incumbents. Some analysts had previously stressed that such a strategy largely hinged on the participation of Quebecor and/or Shaw.
For his part, Quebecor's chief financial officer, Jean-François Pruneau, said his company's Vidéotron Ltée division still has plenty of unused AWS (Advanced Wireless Services) spectrum that it purchased during the last government auction in 2008. And since that spectrum can be used to upgrade its mobile network to the next-generation standard, known as LTE (Long-Term Evolution), Quebecor may opt to sit out the 700 MHz auction.
"From a capacity standpoint, we don't need to participate," Mr. Pruneau told delegates at a CIBC investor conference in Montreal that was webcast. "That said, data consumption, we obviously know and see that data consumption is rising. And at some point, is 40 MHz going to be enough? I don't know. So, maybe we are going to have to participate just to protect our capacity for the future."
Quebecor spent $554.5-million on AWS spectrum in 2008, according to data on the Industry Canada website. While the vast majority of that spectrum covers the province of Quebec, it also picked up for $96.4-million a small block of spectrum in the Toronto area that covers a population of 5.6 million.
Mr. Pruneau confirmed Wednesday that Quebecor has no plans to build a mobile network in Toronto with that 10 MHz of spectrum. Although Quebecor is prohibited from selling its AWS spectrum to a wireless incumbent until 2014, it has nonetheless received "inquires" about that spectrum, he said. He provided no further details.
"The value of the spectrum has certainly not been impaired over time. And in fact, I think it has increased since we acquired it," he added.
Addressing that same conference, Brad Shaw, chief executive officer of Calgary-based Shaw Communications, said the chance of his company participating in the 700 MHz auction is "very low." Other new entrants, such as Mobilicity and Public Mobile, have confirmed in recent weeks that they plan to participate in the 2013 auction because the 700 MHz frequency is considered key to forging a path to LTE – especially to support growing demand for mobile video.
It has been a year, though, since Shaw decided to abandon a $1-billion plan to enter the competitive wireless business after spending $189.5-million on wireless licences in 2008. Instead, it opted to pursue a less costly WiFi strategy.
"We're still not interested in building a traditional wireless network," Mr. Shaw said Wednesday. "But when I look at it, and at this moment in time, I would say if there was an opportunity for some strategic partnership, some strategic alliance – and if that was even possible, we would be interested."
The AWS spectrum that Shaw purchased in 2008 covers areas of British Columbia, Alberta, Saskatchewan, Manitoba and northern Ontario.
"I think it is still an appreciating asset ... When you look at the AWS, the spectrum, there may be an opportunity in a strategic partnership or some other types of opportunities that may come about. We're open, but we know that it is an asset that's valuable and our plans are to make sure that we make good use of it, however that is."
When asked about the potential of industry consolidation, especially among new entrants, Mr. Shaw appeared to dampen market speculation about his company becoming a potential acquirer down the road.
"I'm not sure the business model has changed too much," he said. "And from what I understand, there would be an extremely low chance of us doing anything with any of the new entrants."