MONTREAL – Consumers and the wireless industry need certainty on the rules for buying struggling, new cellphone carriers, the head of a telecom industry group says.
Clarity is also needed on the sale of unused spectrum licences to major telecom players to build out their cellphone networks, said Bernard Lord of the Canadian Wireless Telecommunications Association.
“The rules are clear, but nobody knows how they are going to be applied,” Lord said in an interview.
The call for clarity from Ottawa follows the recent announcement by Telus (TSX:T) that it has signed a deal to scoop up Mobilicity for $380 million in an agreement that would see the struggling carrier sold before its spectrum licence can be transferred in 2014.
Meanwhile, Rogers (TSX:RCI.B) has also signed an option to buy unused spectrum from Shaw Communications and an arrangement with Quebecor that could see it acquire that company’s spectrum in Toronto.
And new carriers Wind Mobile and Public Mobile are reportedly up for sale after launching several years ago.
“What you see right now is a lot of volatility in the industry,” said Lord, who will be speaking at the Canadian Telecom Summit in Toronto on Monday.
“Consumers don’t benefit from uncertainty from governments.”
Industry Minister Christian Paradis is reviewing the sale of Mobilicity and is also looking at the transfer of unused spectrum licences.
Spectrum refers to radio waves over which cellphone networks operate, carrying voice and data. During the last spectrum auction, a portion was set aside for only new companies to bid on in an effort to boost competition among wireless carriers.
However, Lord said few countries have more than three major national wireless carriers and some have two.
“I can’t predict what will happen in the marketplace,” he said of the Canadian situation.
“It raises questions of what is really sustainable. Competition is essential for consumers, but in the end if it’s artificial competition it never works.”
He said that though Rogers, Telus and Bell (TSX:BCE) are Canada’s three major carriers, there are thriving, regional thriving players such as Manitoba Telcom Services, SaskTel, Quebcor’s Videotron and Eastlink.
Lord also noted that since Canadians are using more data on their smartphones and tablets, there has to be enough wireless spectrum released by Ottawa in the coming years to avoid clogged networks.
Networks are like a four-lane highway now, but that will be a fraction of what’s needed, he said.
“In five years, now you need to transform that four-lane highway to a 50-lane highway. That’s done through releasing more spectrum and deploying the spectrum.”
Canadians are using more and more data to do things like stream video, play games and use mobile apps.
The federal government will be auctioning off 700 megahertz spectrum in the fall to allow carriers to further expand their networks.
Without enough spectrum, Canadians could end up with powerful and sophisticated devices running on “clogged up” networks in a few years, Lord said.
Telecom analyst Troy Crandall said carriers know they will need more spectrum.
“Everybody wants spectrum and they don’t necessarily have a use for it yet, but they know at some point they’re going to use it,” said Crandall, of MacDougall, MacDougall & MacTier.
A study to released by the Canadian Wireless Telecommunications Association on Monday said the wireless industry generated an overall economic benefit of $50.2 billion in 2011, its most recent statistic.
That was up 16.7 per cent from $43 billion in 2010.
Canada’s wireless industry supported 280,000 jobs in 2011, including direct, support staff and indirect employment, said the study by consulting firm Nordicity.
In 2011, Canadian wireless revenues grew 6.3 per cent to $19.1 billion, up from $17.9 billion in 2010.
The number of mobile subscribers followed a similar trend, growing by six per cent in 2011 to 27.3 million, up from 25.8 million in 2010, the study said.