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Ottawa puts Shaw’s wireless sale in peril

A Shaw Communications office is pictured in this undated handout image.


After abandoning its plans to enter the wireless business, Shaw Communications Inc. looked as if it had found a way to soften the financial blow by selling a valuable chunk of wireless spectrum. Now, that plan is in jeopardy, as Ottawa is expected to block its estimated $300-million deal to sell unused wireless spectrum to Rogers Communications Inc.

Since Shaw announced last year it sold Rogers an option to purchase its airwaves, the federal government has hardened its policy on Canada's wireless industry and reiterated frequently it will block spectrum transfers to major players in its push to spur competition.

Officially, Shaw still believes it can get the deal done. "Well, the rules [were] pretty clear when we bought this spectrum that after five years you could transfer them to incumbents, and so we still work on that premise and we are not sort of entertaining hypothetical ideas," chief executive officer Brad Shaw said on a June 26 conference call. The company declined to comment this week.

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But analysts widely agree Ottawa is unlikely to approve the transfer of the Calgary-based cable giant's licences to Rogers when the five-year ban on their sale to one of the country's dominant wireless players expires on Sept. 1. So what is Plan C for the airwaves?

Scotia Capital Inc.'s Jeff Fan suggests Shaw could contribute the spectrum to a consolidated fourth carrier that could emerge if someone scoops up Wind Mobile, which is for sale, and Mobilicity, which is under creditor protection. In a July research report, he argued the government is willing to do whatever it takes to support the creation of that fourth player – whether led by Quebecor Inc. or private equity, or some combination of the two – and raised the possibility that Shaw could play a role if its spectrum transfer to Rogers is rejected.

Mr. Fan pegged the value of Shaw's spectrum in such a scenario at $150-million, but hypothesized the company could also consider taking an equity stake in the new venture.

Others are skeptical about that idea, though. "I very much doubt Shaw will vend their spectrum into a Quebecor-led consortium," BMO Nesbitt Burns Inc. analyst Tim Casey said in an interview Friday, noting the company has already tried to build a wireless business once.

Shaw walked away from that effort in September, 2011, after balking at what it projected would be a $1-billion price tag to get into the industry. It has since turned its focus to building a WiFi network in Western Canada and last month announced a $1.2-billion (U.S.) acquisition of Denver, Colo.-based data centre operator ViaWest Inc.

Shaw spent $189.5-million in the 2008 public auction to win the licences for advanced wireless spectrum that covers British Columbia, Alberta, Saskatchewan, Manitoba and Northern Ontario.

The companies did not disclose the exact price Rogers would pay if it exercised the option but analysts have put it in the range of $300-million.

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Rogers has already paid a non-refundable $50-million for the option alone and Shaw management said last year that Rogers had also made a $200-million deposit that would be repaid if the option is not exercised.

If it cannot eventually find a buyer, Canaccord Genuity Corp. head of research Dvai Ghose noted Shaw could risk losing the spectrum in five years for failing to meet minimum build requirements within a 10-year period as set out in the terms of licence.

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About the Author
Telecom Reporter

Christine Dobby covers the Canadian telecom industry for The Globe and Mail. Before joining the Globe in May 2014 she reported for the Financial Post for three years, most recently writing about telecom and media. She has also reported for the Toronto Star and New Brunswick Telegraph-Journal. More


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