Canadian Industry Minister James Moore is consulting mobile-phone company executives as the government faces pressure to alter policies that may ease the market entry of U.S. firms such as Verizon Communications Inc. (VZ)
Moore, who was appointed by Prime Minister Stephen Harper July 15, was scheduled to meet in Ottawa yesterday with senior executives from Canadian companies such as BCE Inc. (BCE), Rogers Communications Inc. and Telus Corp., according to a person familiar with the meetings. Moore asked to meet the business leaders to solicit their views on the government’s wireless policies, said the person, who asked not to be identified because the meetings aren’t public.
Investors have punished the shares of the three largest wireless providers, partly due to speculation that recent policy decisions by Harper’s Conservative government will subsidize the entrance of U.S. carriers such as Verizon into Canada’s market. In a July 25 statement, BCE said the government’s decision to block Canada’s largest phone companies from buying smaller domestic competitors will allow New York-based Verizon to acquire those businesses at “cut-rate prices.”
The meetings show the government, which has pledged to increase competition in the wireless industry, is listening to industry concerns, according to Iain Grant, a telecommunications analyst with the SeaBoard Group, a technology consulting company.
“I don’t see the government changing course,” Grant said by phone yesterday from Montreal.
Moore’s office declined to provide details about the meetings. “The minister is meeting with representatives from various sectors and these meetings are private,” Jessica Fletcher, director of communications at Industry Canada in Ottawa, said in an e-mail.
The market value of Montreal-based BCE, Canada’s largest telephone company, Rogers (RCI/B) of Toronto and Vancouver’s Telus has slumped a combined C$13.5 billion ($13.1 billion) through yesterday from their 2013 highs, partly on concern Verizon may acquire Toronto-based Wind Mobile and buy wireless spectrum to build a fourth national carrier in Canada.
BCE’s stock has lost 11 percent since touching a 2013 peak on May 22, while Telus is down 15 percent from that date. Rogers declined 20 percent since its year-to-date top April 10.
BCE last week called on Harper to close “loopholes” in his policies that it says favor U.S. wireless providers, echoing concerns expressed by Rogers and Telus.
Verizon said June 18 that it is interested in acquiring Canadian carriers such as Wind Mobile.
BCE spokesman Mark Langton said in an e-mail the company doesn’t confirm meetings with government officials. Spokeswomen for Telus and Rogers didn’t respond to e-mailed requests for comment.
Other policies that will unfairly benefit Verizon include the decision to reserve airwaves for new entrants and rules that force incumbents to offer their networks for use by competitors, BCE said.
Verizon spokesman Bob Varettoni declined to comment on the Canadian firms’ concerns about his company’s potential entry. Verizon is “cautiously looking” at entering the market in Canada, where most of the population lives near the company’s existing wireless properties, Verizon’s chief financial officer Francis Shammo, told analysts on a July 18 conference call. “We continue to explore and have discussions, but, at this point, it’s just really just an exploratory exercise,” he said.
Business and labor groups have come to the support of the industry. In a July 26 letter to Harper, the Ottawa-based Canadian Council of Chief Executives said the government’s current policies discriminate against Canadian companies in favor of large foreign operators.
A healthy investment climate requires government policy and regulation to be clear, fair and predictable, John Manley, the organization’s chief executive, said in the letter. “This is critical to fostering economic growth and to enhancing the ability of Canadian firms to provide quality goods and services to Canadian consumers.”
The Communications, Energy and Paperworkers Union of Canada issued a statement yesterday calling the policies “the most ill-conceived policy the Harper government has come up with.”
In response to Manley’s letter, Andrew MacDougall, director of communications for Harper, said the government is seeking to generate more competition in the industry.
“Our government’s view has been clear, we want greater competition across Canada,” MacDougall said in an e-mail. “This means better prices for Canadian consumers.”
Verizon’s interest comes after the Canadian government began efforts to boost competition in the wireless sector with a 2008 spectrum auction. Wind Mobile and fellow new entrants Mobilicity and Public Mobile Inc. bought spectrum set aside for them in that auction. So far, the three have struggled against the big-three existing carriers, which control about 90 percent of Canada’s mobile-phone market.
Verizon seriously began to consider a bid for Wind Mobile following the June 4 decision by Moore’s predecessor, Christian Paradis, to block Telus (T)’s purchase of Mobilicity, a person familiar with the negotiations said at the time. Paradis also said in June he would need to approve transfers of spectrum that had been set aside for smaller competitors in a 2008 auction. The prospect of bidding for Wind Mobile, which acquired some of the reserved spectrum in the auction, without having to compete with one of Canada’s three biggest carriers further encouraged Verizon, the person said.
Telus has asked the Federal Court to quash the government’s policy on the transfer of wireless spectrum, according to an application filed in court yesterday.
Telus said the policy Paradis unveiled in June breaks the original auction rules the company relied on to decide how much spectrum to buy and what price to pay.
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