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Rogers Favors Open Canadian Wireless Over ‘Flawed’ Policy

Rogers Communications Inc. (RCI/B), Canada’s largest wireless carrier, said the government should scrap foreign ownership limits on telecommunications companies rather than stick with the current “flawed” policy that favors global competitors such as Verizon Communications Inc.

“If the end objective for government is to say ‘let’s open up the market,’ then we’d rather have it open, than flawed in terms of the structure that is currently in place,” Chief Executive Officer Nadir Mohamed said in an interview today at Bloomberg’s Toronto office. “It’s not a level playing field.”

Mohamed and his counterparts at BCE Inc. (BCE) and Telus Corp. (T) have been pressing the Canadian government to change its national wireless policy which they say is unfair and handicaps the big three against a potential new entrant like Verizon. The New York-based company, whose market value of $135 billion is close to double that of BCE, Telus and Rogers combined, said in June it’s weighing a bid to buy Wind Mobile, the largest of three new Ontario-based carriers.

Verizon Chief Financial Officer Fran Shammo described the possible bid at the time as “just us dipping our toe in the water,” and the Globe and Mail reported Aug. 14 the company may be backing away from its bid. Robert Varettoni, a spokeswoman for Verizon, said Aug. 9 Wind is one of many business opportunities that the company is looking at. Varettoni declined to comment on Canadian issues today.

Four Competitors

The government has been trying to boost competition to lower wireless bills and has pledged to foster four competitors in each region of the country. In a spectrum auction in January, incumbents will be limited to bidding on just one of four blocks of prime 700-megahertz airwaves while new entrants, including potentially Verizon, could bid for two.

James Moore, who became Industry Minister last month has said he will not change the timing of the auction or rules on block allocations.

“For a company to establish itself in the Canadian marketplace, that’s a scale of spectrum they would require to compete across the country,” Moore said yesterday in an interview.

Asked if the government would consider eliminating the remaining restrictions on foreign ownership of phone companies, Moore said that “our policy is to encourage more competition, and our rules in this auction we think will arrive at that.”

Current rules prohibit any foreign company from buying a carrier with more than 10 percent market share, which includes BCE, Telus and Rogers.

Transfer Spectrum

While Mohamed said he would prefer scrapping foreign ownership restrictions over the status quo, his first preference would be to change the current rules.

Rogers, BCE and Telus are opposed to rules that effectively stop them from buying smaller rivals with less than 10 percent market share because it would mean a transfer of spectrum ownership while there is no clause stopping a major foreign carrier from doing so.

Shares of BCE, Rogers and Telus tumbled after Verizon confirmed it was mulling an entry into Canada. The shares have since recovered some of those losses after the Globe report Verizon may not bid.

Rogers rose 0.5 percent to $40.79 at the close in Toronto. The shares have dropped 9.7 percent this year. BCE is little changed over the same period, while Telus has dropped 2 percent.

The carriers are also arguing for a change to the spectrum auction rules.

Postpone Auction

“It’s specifically about government artificially creating rules that subsidize a large foreign incumbent to take advantage of rules that were set for new players,” said Mohamed. “We’re open for competition, just on terms that are the same as ours,” he said.

If the government wants to really open up the country to foreign ownership, then it should postpone the spectrum auction and first address that, Mohamed said.

“If the objective is to allow foreign companies to come in, let’s not do it with what I would describe as a stacked deck,” he said.

Rogers would survive as a company if that rule were scrapped by the government, Ken Engelhart, Rogers’s vice president, regulatory affairs, said in the interview.

“We would,” Engelhart said. “We’re not interested in selling.”

Deposits by those planning to bid in the Jan. 14 auction must be made by Sept. 17. Mohamed said there is still time for the government to come up with an alternative before that deadline and that rule changes could still be made beyond September.

Smaller carriers Wind, Public Mobile and Mobilicity have all struggled to gain market share from their larger rivals, even after the Canadian government reserved wireless spectrum for them in 2008. The government in June blocked Telus’s bid to buy Mobilicity, citing the decision as a precedent for blocking the transfer of spectrum.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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