Study: Verizon Would Need to Invest $3 Billion to Build a Canadian Network

by Istvan Fekete on August 23, 2013

Earlier last month, there were only rough estimates of how much a new player such as Verizon would need to shell out to enter the Canadian wireless market and become a viable player. But Moody’s took the time to investigated the case and found that the amount is much higher than expected: Verizon would need to invest more than $3 billion just to get started in Canada’s wireless industry, they say.

The majority of the above costs would be for the process of building a network and establishing a mobile phone service infrastructure. This raises the costs, especially in underserved areas such as rural markets, the Moody’s Investment Service report highlights.

“Although competitive threats tend to cause uncertainty and can lead to performance pressure, we see limited downside for Bell Canada, Rogers Communications Inc. and Telus Corp. from a foreign company entering the market,” analyst Bill Wolfe said in the report, released Thursday.

In other words, if you expected to see a price war, this isn’t what you are going to get if Verizon decides to enter the Canadian wireless landscape. The reason is simple: the new entrant would need to develop a top-quality network, which is a costly and time-consuming process.

The report sheds light on the required time frame as well: alongside the $3 billion, it would take about three years for Verizon to build up network coverage and reach critical mass. This also means the incumbents would have enough time to better position themselves in terms of networks and services.

And from what the most recent anti-Verizon ad campaign shows, they seem to care about wireless services. The Big Three have launched another wave of newspaper ads against Ottawa’s wireless policy. Furthermore, Bell and Telus have commissioned a survey showing that Canadians don’t want the government to favour any new entrant such as Verizon. They would favour a Canadian company instead.

And the campaign is just starting to get traction: a US consumer advocate, Ralph Nadler, sent an open letter to Prime Minister Stephen Harper saying that Verizon is among the country’s biggest corporate tax dodgers.

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

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