Rogers Acquires Videotron’s Unused Wireless Spectrum for $180 million

by Istvan Fekete on May 31, 2013

Quebecor Inc.’s wireless division, Videotron, has signed a 20-year partnership with Rogers Communications Inc. to build and operate a shared LTE network in Québec and the Ottawa region in Ontario.

What is interesting, though, is that this agreement also cedes Rogers — Canada’s No. 1 wireless operator — Videotron’s unused wireless spectrum. This is the second public move of the red carrier to widen its wireless spectrum by acquiring unused spectrum from smaller companies such as Shaw and now Videotron.

The deal specifies $180 million in cash for transferring the wireless spectrum rights.

“In addition to the network sharing agreement, Videotron and Rogers have also come to an agreement regarding Videotron’s unused AWS spectrum in the Greater Toronto Area. Videotron will have the option to transfer its Toronto spectrum licence to Rogers, subject to regulatory approvals, beginning January 1, 2014 for a price of $180 million,” the press release informs.

“Data usage is exploding and customers want to continue to enjoy the fastest possible speeds and throughput. Our plan is to put this unused spectrum to use to meet this demand, especially in a dense urban area, like Toronto,” said Nadir Mohamed, President and Chief Executive Officer, Rogers Communications Inc.

As part of the overall agreement, Rogers and Videotron will each provide each other with services for which Rogers will receive $200 million and Videotron $93 million, payable over a period of 10 years.

This deal, however, is subject to regulatory approval. If it goes though, it will give Rogers the power to expand its network capacity in Canada’s most populous city to meet the growing demand for smartphones.

Meanwhile, Industry Minister, Christian Paradis, is reviewing Ottawa’s policy on the transfer of wireless licenses. The main issue is that which we have previously highlighted: the government has stated that it wants to boost competition in the Canadian wireless industry during the 2008 wireless spectrum auction, which has been dominated by Rogers, Bell and Telus. This would be achieved by ensuring at least some licenses go to new players.

Looking at the wireless industry landscape after six years of “wireless competition”, I can say that the new players have brought much-needed competition into the market, but they haven’t been able to change the setup. The market is still dominated by the incumbents, who retain 94% of mobile subscribers.

And, in the end, the wireless startups — which paid hard money to obtain a wireless license, compared to incumbents — are now struggling for survival, with most of them looking to find a buyer. Mobilicity, for example, received an offer from Telus, and will be part of Canada’s No. 2 wireless carrier.

Other regional carriers such as Videotron and Sasktel have been able to become staunch regional competitors in their local markets, but as the recent wireless spectrum deal with Rogers shows, they lack the power to grow further.

However, building an LTE network together gives Videotron a chance to grow by offering the most sought-after handsets such as the iPhone 5 on its own market.

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Written by: Istvan Fekete. Follow by: RSS, Twitter, Facebook, or YouTube.

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