Verizon Communications Inc. confirmed on Tuesday that it is considering an entry into Canada's $19-billion wireless market in the wake of a report earlier this week by The Globe and Mail.
Chief financial officer Fran Shammo told The Wall Street Journal the U.S. telecommunications giant is in the preliminary stages of weighing a potential expansion into Canada. "We're looking at the opportunity," Mr. Shammo told the Journal in an interview at the newspaper's CFO Network conference in Washington. "This is just us dipping our toe in the water."
Although Mr. Shammo declined to provide further comment about Verizon's plans, he noted that unspecified regulatory issues could present an impediment.
"We constantly evaluate a wide variety of business opportunities, and this is one of many. We have no further comment," Verizon spokesman Bob Varettoni wrote in an e-mail to The Globe on Tuesday.
One day earlier, The Globe reported that Verizon has held exploratory talks with investors in Wind Mobile in recent weeks, but those discussions are still at an early stage. An acquisition of Mobilicity, another struggling new-entrant carrier, also remains an option.
New York-based Verizon is also said to be interested in bidding in the federal government's auction of the 700 megahertz frequency in January – a move that would potentially solidify its status as a formidable competitor at time when Ottawa is desperate to salvage its goal of having at least four carriers in every regional market.
Verizon Communications owns a 55-per-cent stake of Verizon Wireless, while the remaining 45 per cent is controlled by Vodafone Group PLC of Britain.
"We continue to believe that the chances of Verizon buying a wireless new entrant and funding spectrum auctions, consolidation and network upgrades remain low," wrote Dvai Ghose, a telecom analyst at Canaccord Genuity, in a research note to clients.
Canadian expansion is likely a long shot because Vodafone's stake in Verizon Wireless is a complication; new entrants have a history of stumbling in the Canadian market; and "time is running out" before the 700 MHz auction, he said. Moreover, if foreign investment "rules are further liberalized in Canada and allow foreigners to buy telecom incumbents, a Verizon acquisition of a wireless new entrant may prevent Verizon from buying a prized asset like Telus," Mr. Ghose added.
Sources say that Verizon is interested in being a long-term evolution (LTE) player in Canada and plans to leverage its existing brand recognition in this country. Since it already has nearly 99 million wireless customers, it has massive buying power for smartphones including high-end devices like iPhones. That means Verizon would be well placed to offer smartphones at competitive discounts even on two-year contracts – at pricing levels that could potentially undercut Canadian incumbents like Rogers Communications Inc., BCE Inc. and Telus Corp.
Verizon Wireless, which is based in Basking Ridge, N.J., operates the largest 4G LTE (fourth-generation, long-term evolution) network in the United States. It controls roughly a 34-per-cent market share of U.S. subscribers.
AT&T Corp. of the U.S., Vodafone Group of Britain and Telenor Group of Norway are other names circulating within the telecommunications industry as possible investors in the Canadian market, according to people familiar with the matter.