Telus CEO Forecasts Wireless Bloodbath if Verizon Treated Like a New Entrant

by Istvan Fekete on July 22, 2013

The telecom sector will “face a bloodbath” if the rules for the forthcoming wireless spectrum auction won’t be changed in the next couple months, Telus CEO told to the Financial Post.

Darren Entwistle’s hard words come hot on the heel of Verizon’s confirmed interest in the Canadian wireless market. The government is committed to have at least four wireless carriers in each province, to preserve competition, which was the cause in the first place for rejecting the Telus-Mobilicity deal.

“There’s going to be a bloodbath, because people are not going to give up on getting that block,” Mr. Entwistle said. “So it’s going to be prohibitively expensive and suck a lot of money out of the industry – money that won’t go to infrastructure and technology, money that won’t go into rural coverage or support lower prices.”

The government’s commitment to competition also comes at the price of allowing wireless startups to purchase two roadblocks of spectrum in the forthcoming 700MHz wireless spectrum auction.

Now Entwistle fears of the obvious: if Verizon finalizes the $700 million Wind Mobile deal, alongside the Mobilicity Wind merger, Verizon will be treated like a new entrant; in other words, it can purchase two blocks of wireless spectrum instead of one, as with the incumbents. Telus, Bell, and Rogers wireless spectrum purchases are limited to one block of spectrum by the new government rules laid down specially for this January auction, which preserves the advantage of spectrum purchase for the struggling wireless startups.

The spectrum purchase, however, comes at a cost. According to Entwistle, it could drive wireless costs up, and also could leave incumbents behind technology-wise.

What he somehow forgets to mention are the following: in the industry’s early days, wireless spectrums were assigned in less transparent processes. This also includes that incumbents received licenses for free to boost a strong start, although now they are paying fees, indeed.

In contrast, when the wireless startups have entered the market, they needed to shell out millions to get spectrum space.

Secondly, the incumbents control more than 90% of the Canadian wireless market, so who leaves whom behind?

If Verizon enters onto Canadian soil, it will retain less than 10% of the market, and by law it is limited to organic growth. One thing is true, though: its market cap is three times the incumbents combined.

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

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