Ottawa’s Policy Threatens Shaw’s Wireless Spectrum Sale

by Istvan Fekete on August 18, 2014

When it bid on wireless spectrum six years ago, Shaw Communications Inc. apparently failed to make all the necessary checks to see if it was worth the nearly $190 million investment. Now, the company faces the threat of a financial blow due to Ottawa’s wireless policy, which could prevent Shaw from monetizing the unused spectrum.

Shaw Communications acquired AWS spectrum in the 2008 public auction, but when it saw the $1 billion bill to get into the industry a couple years later, it decided to walk away from the initiative. So, practically, it spent $189.5 million six years ago on wireless licences that it initially intended to deploy, but never used.

Five years later, however, it did receive an offer it couldn’t refuse: the return on investment looked good, as Rogers offered an undisclosed amount of money for the unused spectrum in a deal that mainly focuses on Shaw’s Hamilton-based Mountain Cablevision Limited business. The catch is that the deal included an option that allowed the transfer of the unused spectrum rights to Rogers. While the total amount of the deal was $700 million, analysts estimated that Rogers agreed to pay $300 million for the AWS spectrum licences.

There is one major issue, though: when the two parties announced the agreement, Ottawa’s wireless policy allegedly allowed the transfer of spectrum from small players to incumbents. Officially, Shaw still believes it can get the deal done. “Well, the rules [were] pretty clear when we bought this spectrum that after five years you could transfer them to incumbents, and so we still work on that premise and we are not sort of entertaining hypothetical ideas,” chief executive officer Brad Shaw said on a June 26 conference call.

Since then, Ottawa has taken every opportunity to emphasize that it won’t allow the transfer of licences to incumbents (see the fate of the Telus–Mobilicity deal). This leaves the question: Is there a Plan C for these airwaves?

Some analysts say Shaw could contribute the spectrum to a consolidated fourth carrier, but others are skeptical about that idea.

Shaw executives need to face another major issue: If the company doesn’t deploy the spectrum, or can’t sell it, it may lose the licence in just five years’ time.

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

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