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Wireless competition in Canada faces hurdles with possible sale of new players


 

MONTREAL – Canada’s wireless industry could face a major shakeup that would threaten competition if new players like Wind Mobile, Mobilicity and Public Mobile moved ahead with plans to sell their companies, telecom analysts said Friday.

“We could theoretically go back down to three players again in certain regions of the country, which isn’t necessarily a good thing,” said analyst Troy Crandall of MacDougall, MacDougall & MacTier.

“You hate to see concentration increase in Canada because it’s already fairly high as it is now with the dominance of the big three.”

The country’s largest wireless carriers — Rogers, Bell and Telus — have had a stronghold on the Canadian market for years, the emergence of the new carriers was supposed to change all of that. Instead, the new entrants have struggled to make a dent against the big three companies.

But now Wind Mobile has been put on the sales block by its Dutch owner VimpelCom, opening up the possibility that a bigger company could swoop in and pick it up. Founder and original owner Anthony Lacavera reportedly also wants to buy it back.

Telus has been in talks to buy Mobilicity, while Public Mobile has hired an investment banker to find a buyer, the Globe and Mail has reported. None of these companies would comment on Friday.

In 2008, the federal government held an auction and set aside spectrum — radio waves over which cellphone networks operate — for new wireless companies to enter the Canadian market.

That auction gave birth to Wind Mobile, Mobilicity and Public Mobile as new wireless carriers. Quebecor’s Videotron also launched a wireless network and Eastlink recently rolled out its service.

Wind Mobile, Mobilicity and Public Mobile are expected to have just over six per cent of the market at the end of this year, up from just under five per cent at the end of 2012, the Convergence Consulting Group has estimated.

To help the small companies, the federal government has eliminated restrictions on foreign ownership rules for small wireless providers and announced it’s reviewing its policy on licence transfer requests, which could make it harder for Rogers, Bell and Telus to buy up the new players and their radio spectrum.

The Conservative government is also aiming to have at least four wireless players in every region of the country when it holds the next spectrum auction later this year.

The 700-megahertz spectrum is considered a prime property for wireless companies because of its ability to allow better and more affordable coverage.

However, Wind Mobile has said it may be difficult to raise enough money for the next spectrum auction expected later this year to build its network.

SeaBoard Group analyst Iain Grant said with less competition, Canadians will be faced with higher prices and bad service.

He said “champagne corks must be popping” at Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T) with the potential sale of the three new carriers.

“Competition in Canada’s wireless industry is in danger of dying on the vine,” said Grant.

He suggests exclusively allocating the new 700-megahertz spectrum that the federal government will auction in November to new companies like the three smaller carriers.

“That would be enough for them to go back to their investors and say ‘We’ve got a brand new start here.'”

However, analyst Mark Goldberg said there’s still lots of choice out there for consumers.

“We don’t yet know what the consumer impact of consolidation would be,” said Goldberg, of Toronto-area Mark Goldberg & Associates Inc.

Other telecom companies could come to Canada, he said.

“It still remains to be seen whether the auction policy that has been created is such that it will encourage a new wave of companies to enter the Canadian marketplace.”

 

 


 
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