Paradis Consults Telecoms on Next Canada Spectrum Auction

Canada may release the rules for its next wireless spectrum auction by the end of the year after consulting with telecom company executives on how to loosen foreign-ownership restrictions.

Canadian Industry Minister Christian Paradis met this month with executives from telecom and cable companies including BCE Inc. (BCE), Telus Corp. (T), Rogers Communications Inc. and Shaw Communications Inc. (SJR/B), his office said. He asked for input on the spectrum auction, raising expectations the government will set the rules in the next few months, said Michael Hennessy, Telus senior vice president of regulatory affairs.

“The minister and his officials have clearly turned their attention to this,” Hennessy said in a telephone interview, referring to the spectrum auction. “It’s one of their priorities.”

The consultations are also raising expectations the government will clarify its plans for foreign ownership rules. In March 2010, Canada pledged to open the industry to more foreign ownership, before then-Industry Minister Tony Clement said in November the government would delay new rules until the auction of spectrum in the 700 and 2,500 Megahertz bands.

Paradis, who was appointed industry minister in May, also solicited views on how to change Canada’s foreign-ownership rules, which prevent overseas investors from owning more than 20 percent of telecom carriers, Hennessy said. “There’s a big question mark about what, if anything, they’re going to do about foreign ownership.”

Raising Billions

The last spectrum auction raised C$4.25 billion ($4.35 billion) for the government. Hennessy said companies would like the government to resolve the foreign-ownership issue before the auction, so they can assess the spectrum’s value and plan how they’re going to finance their bids.

In laying out the auction rules, the government may clarify whether some of the spectrum will be set aside for new telecom entrants, as was done in the last auction in 2008.

Anthony Lacavera, chairman of Globalive Holdings, said the government’s recent emphasis on promoting competition and lowering consumer prices suggests it will again set aside spectrum for new entrants. “They are still leaning toward liberalizing the foreign-ownership laws with respect to telecommunications,” Lacavera said by telephone.

Overturned Decision

In December 2009, Prime Minister Stephen Harper’s cabinet overturned a decision by the Canadian Radio-television and Telecommunications Commission, Canada’s broadcast regulator, which found Globalive violated foreign-ownership limits. Globalive, which sells mobile phone services under the Wind Mobile brand, was backed at the time by Egypt’s Orascom Telecom Holding SAE, which has since merged with Russia’s VimpelCom Ltd.

Canada had the third-highest prices for mobile-phone services in the world, according to a 2009 study by the Organisation for Economic Co-operation and Development. A 2011 OECD study showed Canada has below-average prices for “heavy usage” plans offering up to 900 calls per month, and above- average prices for the lowest-usage plans.

Industry analyst Dvai Ghose said he expects the government to relax foreign-ownership restrictions in telecommunications, which may pave the way for Bell and Telus to merge.

“If you allow foreigners into our market, it becomes much more compelling to say we should allow one Canadian champion,” said Ghose, co-head of Canadian research at Canaccord Genuity.

Ghose also expects the government to make it easier for new entrants to bid in the airwave auction, either by setting aside spectrum for smaller companies or by capping how much companies such as Bell can buy.

“The fear is that there may not be enough capital to sustain new entrants in Canada,” said Ghose.

A spokeswoman for Paradis, Pascale Boulay, confirmed the minister has met with 13 companies since Aug. 16, including Globalive, Rogers Communications Inc. (RCI/B) and Quebecor Inc., which owns cable provider Videotron Ltee. She declined to elaborate on the meetings.

To contact the reporters on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net;

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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