The CEO of Canadian wireless operator Telus Darren Entwistle has predicted that January’s 700 MHz auction will result in a “bloodbath” and called for the rules to be changed so that there is a “level playing field”.
In the auction the…
The CEO of Canadian wireless operator Telus Darren Entwistle has predicted that January’s 700 MHz auction will result in a “bloodbath” and called for the rules to be changed so that there is a “level playing field”.
In the auction the government plans to sell four blocks of digital dividend spectrum and will allow new entrants to the market to acquire two of the blocks, while existing operators will only be allowed to buy one.
Verizon Communications is exploring the possibility of entering Canada and Entwistle worries that the US telecoms giant – with a market cap of US$143bn – will blow the competition out of the water in the auction and acquire two of the blocks, leaving Canada’s three established operators to fight it out for the other two.
The CEO told local press he is concerned that the situation will cause Bell Canada, Rogers Communications, and his company to overspend and will leave one of them behind. Telus is marginally the smallest of the three operators by market capitalisation.
The government wants four wireless players in every region of Canada and has been modelling policy with that aim in mind.
However, Ottawa is also keen on operators improving their coverage in rural areas – something Entwistle says they won’t be able to invest in as much should they overspend on the 700MHz tender.
The deadline for deposits for the auction is 17 September and Entwistle is campaigning, alongside Bell and Rogers, to change the rules before then so that there is, in his words, a “level playing field”.
Entwistle proposes either opening the auction up entirely and removing any caps on the amount of spectrum any player can buy; capping Verizon in the same way the Canadian incumbents are capped; or allowing all players to buy two blocks of spectrum.
Verizon CFO Fran Shammo shed some light on his company’s thinking on entering the Canadian wireless market in its Q2 results call yesterday.
While he was keen to stress that it was only an “exploratory exercise” at the moment, he also laid out why entering the market could make sense for his company: “If you look at the population of Canada, about 70% of that population is between Toronto and Quebec.
“That’s adjacent to the Verizon Wireless properties. Again, if you look at the spectrum auction, it mirrors up exactly what we launched here in the United States on the 700 MHz contiguous footprint.”
However, Shammo said that they were assessing the regulatory environment and were cautious in that respect. While the government appears to have rolled out the red carpet for an overseas investor which could create a viable nationwide fourth player, foreign majority-ownership in telecoms is a relatively recent development in the country having only been passed into law a year ago.
Verizon has been reported to have made a C$700m bid for smaller Canadian operator Wind Mobile and be in talks with fellow minnow Mobilicity.
In spite of its apparent advantage in the upcoming auction, were Verizon to enter the market it would face a serious battle to gain market share. Even if it were to acquire Wind and Mobilicity it would have less than one million subscribers, while the three incumbent operators all have more than seven million.
