Ottawa’s Determination to Establish Fourth Wireless Player Costs Investors Billions

by Istvan Fekete on September 18, 2014

The Harper government’s determination to impose the establishment of a fourth wireless player in the country may bear fruit thanks to Quebecor and Anthony Lacavera’s Wind Mobile. The recent moves from these small wireless players seem to point in the “right direction” from the government’s perspective, but Ottawa’s wireless policy still continues to generate a trail of speculation and confusion, and its immediate visible result is billions of dollars in investor losses, Terence Corcoran highlights.

We don’t have to look too far: just a couple of days back Anthony Lacavera’s Globalive Capital acquired VimpelCom’s stake in Wind Mobile for $285 million. The price paid for the shares was $135 million (part of the $285 million deal). However, to push Wind Mobile to its current phase, the Russian telecom giant needed to invest more than $1.5 billion. The loss incurred by VimpelCom was roughly $1.5 billion.

Another great example is Mobilicity. The wireless startup was launched in 2010 with high hopes but is currently under bankruptcy protection. Losses: roughly $500 million. Mobilicity’s shareholders filed a lawsuit against the Canadian government for breach of promise and are seeking $1.2 billion in damages. That’s roughly $2 billion in losses for investors, as a direct result of Ottawa’s push for a fourth wireless player and its current rules limiting the growth of small carriers.

Now, there are several questions that beg an answer: How will these investors recoup their lost money? Will Wind Mobile and Mobilicity merge? Will Quebecor emerge as a fourth national player?

There were rumours of a Wind Mobile–Mobilicity merger last year when Verizon reportedly bid on both companies in an attempt to enter the Canadian wireless market. But the US carrier ultimately decided to skip this market.

Quebecor has been lobbying the government to tweak the wireless rules to foster the growth of new entrants. Will Ottawa tweak its rules? If yes, will it keep its word? Unfortunately, Mobilicity sets a bad precedent: the government broke its commitment at the expense of investors.

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

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