TORONTO – Verizon Communications Inc. says it is no longer interested in entering the Canadian wireless market, leaving the federal Conservatives with no obvious source of serious competition to the existing big three players.
Verizon CEO Lowell McAdam commented Monday after the company announced it had agreed to pay US$130 billion for the 45 per cent stake in Verizon Wireless owned by British cellphone carrier Vodafone.
“At this point in time we’re not interested in entering the Canadian wireless market,” McAdam said, according to Verizon spokesman Bob Varettoni.
McAdam also suggested in an interview with Bloomberg that speculation Verizon might try to compete in Canada was “way overblown.”
The prospect of Verizon entering the Canadian market has become a political hot potato, pitting the consumer-oriented Conservatives against Big Business, which argued that the auction process was set up to favour foreign competitors and disadvantage Canadian incumbents.
The Conservatives have argued relentlessly that the upcoming spectrum auction would be a clear win for consumers because it would encourage competition from new players.
With no Verizon, it is far from clear where that competition can come from now. But Industry Minister James Moore insisted, through his spokeswoman, that consumers will still come out on top.
“The rules for the upcoming spectrum auction were designed, well in advance, to create the right conditions so that consumers benefit. The result of the auction will be positive for Canadian consumers, regardless of outcome, because the rules were designed with their interests up front,” said director of communications Jessica Fletcher in an email to The Canadian Press.
Canada’s wireless companies were quick to respond, saying Verizon’s decision does not ease their concerns about wireless rules in this country.
Josh Blair, the executive vice-president of Telus (TSX:T) said he remains concerned about government policy on the spectrum — the radio waves needed to make cellphone networks operate — available to Canadian wireless carriers.
“This has never been about Verizon coming into Canada, or not, it’s always been about fair access to spectrum,” Blair said.
“Spectrum is the lifeblood of our industry, and without fair access to it, that’s going to potentially, permanently disadvantage Canadian companies,” he said.
Bell Canada spokesman Mark Langton called it “significant news,” but echoed Blair’s concerns about regulations in Canada.
“The regulatory loopholes that give advantages to big foreign carriers remain and should be closed,” Langton said.
“Canadians have said they want competition, but only if it’s fair competition.”
Some telecom analysts, however, said they were not surprised Verizon decided to move to greener pastures.
Iain Grant, of SeaBoard Group, said that compared to the blockbuster $130-billion Vodafone deal, potential profits in Canada wouldn’t be substantial enough to lure the American giant in.
“We represent 1/130th of the opportunity, which makes us quite small.”
Though Grant wouldn’t rule out Verizon revisiting Canada sometime in the future, he said the trio of leading Canadian telecoms have reason to celebrate.
“I would think there are champagne corks being popped right now in Toronto and Vancouver.”
Eamon Hoey, of Toronto-based Hoey Associates Management Consultants Inc., also said he wasn’t surprised by the move since, in his view, Verizon clearly had bigger priorities.
“I don’t think they ever had any intention to come to Canada,” he said, noting the company’s long-standing interest in the Vodafone stake buyout.
The prospect of Verizon entering the Canadian market had caused a stir among Canadian wireless carriers, who argued that big foreign players like Verizon would be given an unfair advantage under the current wireless rules.
Those rules remain “wide open,” Blair said.
“Just because Verizon isn’t coming doesn’t mean another large foreign company … might not want to come to Canada and take advantage of rules that, literally, would gift them a path to half of the 700 megahertz spectrum,” he said.
Blair said Telus would like to see the rules changed before January 2014 when telecom companies bid in an auction for wireless spectrum.
Telus, Rogers and Bell have complained that foreign companies are given advantages since under the auction rules they’re treated like a new player entering the Canadian market.
That means a foreign bidder would have access to bid on two blocks of prime 700 megahertz spectrum while the three domestic carriers can bid on only one block apiece.
Companies have until Sept. 17 to apply, so no one will have a full grasp of the competitive landscape until then, Fletcher said.
The big three Canadian carriers also launched a media campaign to warn that they would be at a disadvantage if Verizon were allowed into the market under the current set of rules.
Thousands of members from two of the country’s biggest unions rallied last week against federal telecom rules they said would let foreign firms into Canada without the guarantee of new jobs.
The head of Unifor, a newly formed mega-union that has among its members thousands of Bell employees, said pushback by labour, business and privacy advocates against the possible Verizon entry likely played a role in the company’s decision.
“I don’t think Verizon or the government anticipated this level of opposition to the possible spectrum bid, but we’ve been able to send a clear message,” national president Jerry Dias said in a news release.