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Dany Lavoie, left and Jean Claude Bresson, both of Montreal installing a cellular phone dish in 30C weather near Shedden, Ont. just south of Highway 401.Mike Hensen

Canadian telecom shares dipped Tuesday morning after an analyst report laid out a path to a fourth national wireless carrier and argued the federal government is willing to do whatever it takes to make it happen.

In a research note dramatically titled, "Government Ready to Deliver the Final Blow," Scotia Capital Inc.'s Jeff Fan cut his target prices on Rogers Communications Inc., BCE Inc., and Telus Corp. Mr. Fan said he believes the Big Three carriers' dividends are safe but warned growth expectations should be tempered if that fourth competitor emerges.

"We estimate the dividend growth over the next three years for Rogers, Telus and BCE will be about 2 per cent, 4 per cent and 0 per cent, [respectively]," he wrote.

The companies' shares fell between 1 per cent and 2 per cent following Mr. Fan's report, which said Quebecor Inc. "holds all the strategic cards" and will wait until certain conditions are in place. Once they are, the company is likely to spearhead the formation of a fourth national operator through a partnership approach that includes financial players.

"We believe Quebecor can structure a transaction to enable it to invest and preserve balance sheet flexibility to buy out the Caisse de dépôt et placement du Québec's 25 per cent interest in Quebecor Media before 2019. Quebecor's involvement also gives financial investors an exit path," Mr. Fan said, noting Quebecor itself or the public market could be buyers five to seven years down the road.

In his view, Ottawa must still block Rogers from acquiring unused spectrum from Shaw Communications Inc. in September and, crucially, establish wholesale data roaming rates at a favourable price for a fourth player before the deadline for the next spectrum auction.

Quebecor has said it wants to see "fair" rates for roaming on its competitors' larger networks before it makes a final decision on expanding. Mr. Fan said he believes the government will make sure that certainty is in place before the AWS-3 spectrum auction it announced last week gets underway in early 2015.

"Unless the CRTC/Industry Canada establishes a rate in the $0.005 to $0.01 per megabyte range, we do not believe fresh capital will be committed by Quebecor or its partners to [a fourth competitor]," Mr. Fan said.

"Industry Canada has demonstrated that it is willing to do what is needed," he added, noting that he believes the CRTC will announce the results of its wholesale roaming review before the AWS-3 auction and that Industry Canada could vary that decision if it is not satisfied with it.

Other analysts, such as Macquarie Capital's Greg MacDonald, share Mr. Fan's view that the government is willing to do what it takes to create the conditions for a fourth operator and that the path looks more likely than ever now.

Decidedly on the other side of the debate, Dvai Ghose, head of research at Canaccord Genuity, responded Tuesday morning with his own publication noting he finds it hard to take the possibility of Quebecor's national wireless strategy seriously.

Mr. Ghose sees a number of barriers to expansion: four-player markets have been unsuccessful globally, he argues; Quebecor's majority shareholder is an elected representative of the Parti Québécois and determined to break up the country, which could spell trouble with the federal government; Vidéotron has no competitive advantages or brand recognition outside of Quebec; and regulators can be a fickle bunch, he adds.

Mr. Ghose also sees a timing problem, in that he expects the decision on the roaming rules to come down after the 2015 AWS-3 spectrum auction has already occurred.

"Consequently, 1) there is no immediate national threat from Vidéotron; and 2) Vidéotron/Quebecor may not get the roaming concessions that they are looking for. As a result, for us, it is still far from certain that Vidéotron will even launch nationally."

"We are beginning to see decent buying opportunities for Canadian incumbent wireless stocks and note that such dips in the past – 2008-2009 on the Wind threat; 2013 on the Verizon threat – provided strong buying opportunities," Mr. Ghose concluded.

Rogers shares were down 1.17 per cent or $0.49 per share to $41.46 on the Toronto Stock Exchange shortly before noon Tuesday. BCE stock was down 0.89 per cent or $0.41 to $48.59 while Telus shares were down the most at 2.1 per cent or $0.82 per share to $38.27.

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