The lack of foreign telecom players at an upcoming auction of wireless spectrum will take some competitive heat off the Big Three carriers, analysts said Monday after the government released the list of potential bidders.
Industry Canada said Monday that a total of 15 participants — including Bell Mobility, Rogers Communications and Telus (TSX:T) — placed a refundable five per cent deposit for the Jan. 14 auction by the deadline.
“We view the list as a key positive for the incumbents and an embarrassment for the government,” said Canaccord Genuity analyst Dvai Ghose.
“We do not expect the competitive dynamics in Canadian wireless to change much as a result of the auction,” Ghose said in a research note.
The Canadian wireless market continues to be dominated by Bell (TSX:BCE), Rogers (TSX:RCI.B) and Telus with a total of about 25 million subscribers.
Regional players such as Quebecor’s Videotron (TSX:QBR.B) in Quebec, MTS Inc. (TSX:MBT) in Manitoba and Bragg Communications, which operates EastLink in Atlantic Canada, are also on the list of potential spectrum bidders.
Two private equity firms in Toronto are on the list, a subsidiary of Birch Hill Equity Partners and Catalyst Capital, a major debt holder for small, struggling Mobilicity. Wind Mobile’s parent, Globalive Communications, is on the list, too.
Analyst Eamon Hoey said Canada’s telecom “oligarchs” have won the battle against foreign competition, referring to Rogers, Bell and Telus, and consumers likely won’t see lower monthly cellphone bills.
“It’s the same old crowd,” said Hoey, of Hoey Associates Management Consultants Inc. in Toronto.
Bell, Rogers and Telus had waged a vigorous publicity battle against the federal government’s relaxed requirements for new entrants, amid reports that Verizon could become a rival in their home turf.
Advocacy group OpenMedia.ca said the big three carriers appear set to continue their stranglehold over the market and is asking for the government to open up Canada’s wireless networks to affordable, independent providers.
“Canadians know that it’s fair rules not foreign investment that will fix our broken telecom market,” executive director Steve Anderson said in a news release.
Anderson is among those who say Canadian wireless costs are too high and the choice is too limited, relative to what’s available in other markets. The federal government advocates increased competition as the way to help consumers.
Industry Minister James Moore said the auction will provide Canadians with high-speed wireless services with the latest technologies and will continue to bring more competition to consumers.
“Well before this summer’s public debate on wireless policy, our government introduced a number of measures to create more choice in Canada’s wireless market and to defend consumers,” Moore said in a statement.
“This trend will continue as a result of January’s auction. In addition to this auction, our government will continue to aggressively pursue policies that ensure consumer interests are at the core of all government decisions.”
The federal government wants to have four wireless competitors in each region of the country to ensure more choice for consumers.
Ghose said the government “bent over backwards to find foreign carriers to act as new entrants.”
But he added without any foreign competition, Bell, Telus and Rogers all seem set to win one prime block of spectrum, per market and the cost per block now may be well below the $500 million he had assumed.
The federal government removed foreign investment restrictions last year for small carriers with a market share of less than 10 per cent, paving the way for foreign carriers to come in as new players.
Bell, Telus and Rogers had strongly objected to the possibility of Verizon entering Canada’s market as a new player and being able to bid on two prime blocks of 700 megahertz spectrum while they could only bid on one apiece.
The 700 megahertz auction of radio waves has been called the equivalent of “beachfront property” by analysts.
These radio waves have the ability to allow cellphone signals to reach into elevators, deep into underground parking lots, traffic tunnels and basements where calls are often dropped and will also help meet consumers’ growing use of smartphones and tablets.
The signal can also travel greater distances and, in rural Canada, will require fewer cellphone towers to provide coverage.
The previous auction in 2008 raised $4.3 billion and brought more competition to the cellphone market with the launch of Wind Mobile, Mobilcity, Public Mobile, Videotron and Eastlink.
Shares in Rogers were up 70 cents to $45.54, shares Telus gained 39 cents to $34.97 and shares in BCE got a bump of 26 cents to $44.19 in late morning trading on the Toronto Stock Exchange.