Canadian Wireless Sector at Crossroads

by Istvan Fekete on April 16, 2013

The Canadian government’s years-long effort to boost competition is just one step away from failure: all three Canadian wireless start-ups are up for sale. VimpelCom, Wind Mobile’s Dutch parent company is reportedly collecting bids for its Canadian business; Telus has entered talks to buy Mobilicity; and Public Mobile has hired investment bankers to find a buyer.

In other words, the Canadian wireless landscape is changing, and it doesn’t look too bright, at least for you, dear wireless subscribers.

Roughly five years ago, the government created special rules in a wireless spectrum auction, with a noble aim: to create strong competition to the dominant players in the wireless industry. These rules have indeed contributed to the growth of new entrants, but the result of the past five years of presence is only a combined 6% of the $19 billion market. The rest is controlled by the incumbents.

Even the CWTA, which aimed to represent the interests of all wireless players, in reality represents the interests of the incumbents, as unmasked by the withdrawal of Wind Mobile, Public Mobile and Mobilicity.

An email obtained by The Globe and Mail sheds light on the real status of the Canadian wireless market, right before the upcoming wireless spectrum auction, which was scheduled to back the competition in the market. But this is not going to happen, or at least that’s how it appears.

“TELUS remains committed to pursuing the Acquisition Transaction and to working expeditiously to negotiate and execute definitive agreements in respect of the Acquisition Transaction on an accelerated timeline,” says a document obtained by The Globe and Mail.

Mobilicity is likely worth between $350 million and $400 million. The wireless start-up entered the market after paying $243.1 million for its AWS spectrum licenses at the last spectrum auction.

Public Mobile, the smallest new entrant, paid $52.38 million for its licenses during the same 2008 auction.

Wind Mobile has received several bids: some voices are whispering about a $1 billion bid, others of a $1.5 billion. Its fate is yet unknown, but since VimpelCom has put it on sale, it will likely merge with one of the three big wireless players.

“We see the Canadian wireless sector at a crossroad,” Drew McReynolds, an analyst with RBC Dominion Securities Inc., wrote in a research note on Wednesday. “Either new capital is invested in the new wireless entrants keeping a fourth national wireless strategy alive, or the new wireless entrants get consolidated by one or more of the three large wireless incumbents.”

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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