New Potential Bidders Emerge for Canadian Wireless Spectrum

Yak Communications, a relatively small upstart in Canada’s phone industry, and Manitoba Telecom Services (MTS Allstream), a more established regional wireless player, have indicated strong interest in bidding for the radio frequencies to be offered in the May 27 auction. Industry analysts also expect bids, separately or with partners, by such players as cable giant Shaw Communications, regional telecom firm EastLink, digital signage specialist Bassett Media Group and fixed-wireless player Look Communications.

These entrants will join Quebecor, a regional player already on record as planning to bid. Montreal-based Quebecor resells airtime on the Rogers Communications national wireless network through its Videotron cable unit. Quebecor has said it intends to spend at least $500 million the next few years on a new wireless network reaching across Quebec and possibly beyond. Quebecor expects the proposed wireless network to be up and running by the end of 2009.

Jockeying for bidding position began in late November, after Industry Canada Minister Jim Prentice announced the government’s strategy. Canada will reserve 40 MHz of Advanced Wireless Services (AWS) spectrum “exclusively for new entrants into the wireless market,” opening the other 65 MHz of new AWS spectrum to all bidders, Prentice said. The 40 MHz is nearly 40 percent of the total spectrum being made available and almost 14 percent of the wireless spectrum available in Canada. Major auctions of mobile spectrum in 1985 and 1995 sold 50 MHz and 120 MHz, respectively (CD Dec 4 p9).

Yak stepped up soon after Quebecor stated its intentions. A subsidiary of Globalive Communications, Yak aims to be the first “no contracts, no gimmicks” cellular provider in Canada, it said. That’s a slap at the $12.7 billion Canadian cellular phone industry’s three major players - Rogers, BCE and Telus -- which have drawn fire for high prices and restrictive contracts. “Canada is one of the least competitive wireless markets in the world,” Anthony Lacavera, CEO of both Yak and Globalive, told Canadian Press in an interview. “Cell phone rates are too high and penetration is too low. Many Canadians do not realize that they're paying from 60 percent to almost 80 percent more than Americans for their wireless service.”

Yak, which recently started an Internet home phone service, plans to bid for the rights to major metropolitan areas around the country, it said. In particular, it will focus on low-to-middle-income households not served by the three big providers. The company hasn’t disclosed how much it might spend on the fresh spectrum.

MTS Allstream, a Winnipeg-based telecom and TV provider already offering regional wireless service in Manitoba, also has indicated it may pursue the new spectrum. But MTS has stopped short of committing itself to a bid until it analyzes the spectrum rules and its options. In a December conference call with investors, MTS CEO Pierre Blouin said company officials “believe the opportunity is significant and has the potential, under the right circumstances, to create long-term value for our shareholders.” If MTS does bid, Blouin said it likely would team with partners chosen for their financial strength or strategic value. Industry insiders speculate that MTS could team with Videotron and Halifax-based EastLink in a joint bid, effectively dividing the country in three.

The other four possible Canadian bidders -- Shaw, Look, EastLink and Bassett -- haven’t declared their intent. But industry observers see all four, especially Shaw and EastLink, as good prospects. Some observers say international mobile players such as Vodafone and T-Mobile could join the bidding by taking minority stakes in new wireless ventures.

The big question is the new entrants’ potential impact on the existing cellular triumvirate of Rogers, Bell Canada and Telus. In line with governmental hopes and intentions, some analysts predict that more competition will mean lower monthly bills, more attractive package bundles and other goodies for Canadian cell phone subscribers. In turn, they say, those changes should encourage wireless penetration in Canada, which lags behind most developed countries with about a 60 percent take rate.

Other analysts caution that it will take years for new entrants to build their own national wireless networks. They also note that yesterday’s cellular upstarts, such as Microtell Telecommunications and Clearnet Communications, eventually were acquired by Rogers and Telus, respectively, in a wave of consolidation.