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Pierre Blouin, CEO of MTS Allstream and Manitoba Telecom Services Inc., raised eyebrows with remarks he made at Bank of Montreal’s annual Media and Telecom conference on Sept. 10.JOHN WOODS/The Globe and Mail

Industry Canada is cracking the whip on wireless carriers, warning them not to talk openly about their strategies for buying spectrum in an upcoming federal auction.

Carriers had until noon on Tuesday to submit application papers and a 5-per-cent deposit to qualify to bid in the auction of the 700 megahertz frequency. In the run-up to that deadline, however, Industry Canada sent an e-mail to prospective applicants to caution them against violating the auction's strict anti-collusion rules, which ban carriers from providing hints about strategy when bidding begins Jan. 14, 2014.

The rules are designed to ensure a competitive bidding process that maximizes the proceeds to the government, which earned more than $4.25-billion from the last auction of wireless licences in 2008.

"The 700 MHz auction is different from previous auctions in that it makes use of anonymous bidding and a reduction in the public disclosure of information prior to the auction to reduce opportunities for signalling and anti-competitive behaviour," reads an e-mail from Industry Canada dated Sept. 12.

Wireless carriers are "precluded from sharing information including, but not limited to, bidding strategy such as the specific licences or licence areas under consideration, or the amount or magnitude that the applicant is willing to pay."

That correspondence was sent to carriers two days after Manitoba Telecom Services Inc.' s top executive raised eyebrows with remarks he made at Bank of Montreal's 14th annual Media and Telecom conference. At that event on Sept. 10, chief executive Pierre Blouin responded to a question about MTS's wireless ambitions outside of Manitoba given it had previously contemplated contributing to the creation of a new national carrier.

During the last spectrum auction in 2008, MTS partnered with New York-based Blackstone Group LP and the Canada Pension Plan Investment Board as part of a consortium to launch a national wireless provider. But once the bidding started, the auction "got pricey" and MTS decided just to buy licences for Manitoba, Mr. Blouin told the event.

He also noted that MTS has since struck a deal to sell Allstream to Accelero Capital Holdings, an investment firm co-founded by Egyptian billionaire Naguib Sawiris. That $520-million transaction, which requires Industry Canada approval, is expected to close by the end of this year.

"It would have to be a heck of a great deal to make it attractive to MTS now, so its not currently in our plans," added Mr. Blouin. It was a comment that some industry executives and journalists interpreted as a confirmation that MTS did not plan to bid for 700 MHz licences outside of Manitoba.

A spokeswoman for MTS declined comment late Monday on whether Mr. Blouin's remarks potentially violated anti-collusion rules.

An Industry Canada spokesman said: "As the application due date was approaching and applicants may have been considering making public comments regarding their participation in the auction, Industry Canada sent information to potential applicants reminding them of the rules regarding the prohibition on collusion for the 700 MHz auction. We will be publishing the names of those applying to participate in the auction on September 23."

The warning from Industry Canada, however, appears to have caught the attention of industry players.

Although BCE Inc., Telus Corp., Wind Mobile and Saskatchewan Telecommunications Holding Corp. confirmed they applied for the auction, other carriers such as Rogers Communications Inc., Eastlink, Public Mobile and Mobilicity declined comment. (For its part, Mobilicity was examining a number of options including potential debtor-in-possession financing proposals, sources said.)

Quebecor Inc. and Shaw Communications Inc. did not respond to requests for comment.

At least one analyst suggested that foreign carriers may appear on the Industry Canada applicants list , since the initial deposit is minimal and refundable.

"The initial deposit required to bid for two nationwide prime blocks is only $16-million and fully refundable," wrote Dvai Ghose of Canaccord Genuity in a note to clients. "Consequently, we could see a number of foreign carriers apply."

Earlier this month, Verizon Communications Inc. said it has lost interest in the Canadian market. Sources have also said that AT&T Corp., T-Mobile, Vodafone Group PLC, Telenor Group and NTT Docomo all decided to pass after taking a look at the Canadian market earlier this year.

With files from reporter Boyd Erman in Toronto

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