Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

The Rogers sign is seen atop the Rogers Communications headquarters building in Toronto in this file photo taken April 25, 2012.


Ottawa warned it will enforce strict new rules on competition in the wireless sector, after it emerged that Rogers Communications Inc. is working on a plan to thwart a possible entry by U.S. giant Verizon Communications Inc. into the Canadian market.

The Globe and Mail reported Friday that Rogers, the country's largest wireless company, is in talks with a private-equity firm on deals for Wind Mobile and Mobilicity, two smaller competitors. Government policy forbids Rogers from buying those companies directly right now because it would lead to "undue concentration" of spectrum, the public airwaves on which cellphone companies rely. Verizon, however, would be allowed to buy those companies and is in active discussions on such a deal.

But under the plan currently under discussion, Rogers would help finance a takeover of Wind, and possibly Mobilicity, by Birch Hill Equity Partners Management Inc. of Toronto. The plan is designed to sidestep Ottawa's restrictions on industry mergers and discourage Verizon from entering the domestic market.

Story continues below advertisement

Industry Minister James Moore's office declined to comment directly on the development. But Mr. Moore's director of communications said the government will not back off its declaration last month that future corporate transactions will be rejected if they concentrate spectrum in fewer hands.

"In June we released the spectrum licence transfer framework. Any requests received by the [Industry] Department will be reviewed based on that framework," Jessica Fletcher said.

A deal such as Rogers is proposing would require multiple levels of approval in Ottawa including from Industry Canada, the Competition Bureau and likely Mr. Moore himself.

The proposal is still in the works and the federal government is therefore not able to signal its approval or rejection of the plan.

Wind Mobile is a financially struggling wireless company with about 600,000 customers across the country. The new plan would see Birch Hill take a controlling ownership in Wind, providing an obstacle to Verizon for gaining a foothold in Canada's $17-billion telecommunications market. Verizon recently made a $700-million initial offer for the business.

Under the plan with Birch Hill, Rogers would contribute money, but would not get an equity stake in the No. 4 national player.

Instead, it would gain a network-sharing agreement with Wind, allowing it to use the smaller company's spectrum to expand its high-speed wireless service at a time when Canadians are using ever-increasing amounts of data on smartphones and tablet computers.

Story continues below advertisement

Verizon is also interested in Mobilicity. The U.S. company wants access to Canadian spectrum so that it can introduce its service in this country. Birch Hill is also looking at an acquisition of Mobilicity, the industry's No. 5 national player, multiple sources say – again, with Rogers as its likely partner.

Birch Hill has been shopping around proposals such as these for months, sources say.

Executives at BCE Inc., Canada's largest telecom provider by stock market value, are staying quiet on the Rogers strategy. But they are pointing to the fact that the elaborate scheme wouldn't be necessary if the Harper government would stow its resistance to allowing big domestic companies to acquire smaller rivals and their wireless spectrum.

"The government does need to close the loophole in the rules that bans Canadian companies from buying wireless start-ups in Canada," BCE spokesman Mark Langton said.

He said Ottawa should leave it to the long-established Competition Bureau to decide if a transaction is worrying in this regard.

"The federal Competition Bureau is the right body to vet industry transactions," Mr. Langton said.

Story continues below advertisement

Analysts, meanwhile warned that such a bold play by Rogers could be quashed by the government. They added they're not certain this would ultimately deter Verizon.

"If the amount of influence and quasi-ownership by Rogers in this new ownership structure is too significant, then we believe Industry Canada will reject it," wrote Vince Valentini, an analyst at TD Securities. "Then we are just back to the Verizon overhang."

While Mr. Valentini said the government won't look favourably on the deal if Rogers appears to actually control Wind, the plan could work if it means the creation of an independently operated fourth player that could expand rapidly across the country using Rogers infrastructure.

That could mean lower prices for consumers as a competitive fourth player emerges to compete with Rogers, BCE and Telus Corp.

"This evolution in the competitive environment would likely be far less threatening than the potential worst-case scenarios with Verizon," Mr. Valentini wrote.

But Verizon, which has a $143-billion market cap, could simply up its bid for Wind.

Story continues below advertisement

"Verizon has massive scale and we believe the return on investment potential in Canada is very attractive for them, so they might be willing to sacrifice a bit of their upside by offering a bit more than they had originally planned," Mr. Valentini wrote.

Dvai Ghose, head of research at Canaccord Genuity, said the Rogers proposal is interesting but probably doomed to fail at the hand of regulators who seem eager to have Verizon come to this country.

"We continue to assume that Verizon seems well positioned to acquire Wind and Mobilicity and enter Canadian wireless on favourable terms, as the Government is bending over backwards to entice Verizon to Canada."

RBC analyst Drew McReynolds said if Rogers could pull off its plan, the move wouldn't be "game changing for the Canadian wireless industry and respective stocks."

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the authors of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies