Canadian mobile spectrum auction underway
The Canadian regulator, the CRTC, recently commenced auctioning 105MHz of spectrum for which nationwide operators Rogers Communications, Bell Mobility and Telus Communications are, unsurprisingly, the main bidders despite the fact that approximately 40% of the spectrum is specifically reserved for new entrants.In addition to the above three incumbents, some of the smaller bidders include Toronto-based Globalive Wireless (which has European and Egyptian backers) and John Bitove’s Data and Audio Visual Enterprises (with some backing from Microsoft co-founder Paul Allen). Other new-entrants into wireless, or those looking to expand their footprint, include Quebecor (which is looking beyond Quebec), Calgary-based Shaw Communications and Eastlink’s Bragg Communications. Although the spectrum rules favour some new entry, the high costs and entry barriers involved in establishing a nationwide network mean that new entrants would need to enter partnerships in order to establish anything more than a niche presence.
Disappointingly, the high bidding has forced a number of smaller bidders out of the race, such as TBayTel and Jaguar Wireless Holding Corp. In addition, a number of qualified bidders dropped out of the auction before it had even begun. A consortium led by US equity houses M/C Venture Partners and Columbia Capital pulled out just hours before the auction was scheduled to begin. Though the consortium was tipped to make a substantial bid with an initial deposit of US$157 million, it had struggled to raise enough money from Canadian partners to meet foreign investment rules. Another major bidding consortium to pull out was that comprising Canada Pension Plan, private equity firm Blackstone Group and regional full-service telco Manitoba Telecom Service (MTS). Another bidder to drop out that were expected to make smaller-scale bids included Primus Canada’s parent Mipps.
The auction revenues have surpassed initial expectations of C$1.5 billion. As at the third stage of bidding, by mid-June, the total revenues from the auction were close to C$3.6 billion. The funds will go into consolidated revenue and be paid towards the country’s C$470 billion federal debt. Nevertheless the high cost of spectrum limits downward pressure on mobile prices and makes the likelihood of a fourth national provider emerging from this auction slim.
For more information on Canada’s wireless market, see our separate report Canada - Wireless Communications - Overview, Statistics & Forecasts.
Lawrence Baker - Senior Research Analyst - BuddeComm
