Canada’s Harper Plans More Steps to Break Wireless Lock

Canadian Prime Minister Stephen Harper said his government will continue to pursue its goal of loosening the grip of the nation’s biggest wireless providers following an airwaves auction that saw Quebecor Inc. (QBR/B) position itself to become a national carrier.

“We want to see at least four players in all markets across the country,” Harper said today in an interview with Bloomberg News and the Wall Street Journal on a flight back to Ottawa from a North American leaders’ summit in Mexico. “I don’t think it necessarily has to be the same four players, but I think we have seen some evidence elsewhere to suggest that the oligopolistic tendencies of the industry tend to break down a little bit as you move from three to four.”

Harper said the auction, which raised a higher than expected C$5.3 billion ($4.8 billion), will bolster his government’s efforts to lower prices for mobile-phone services to “internationally competitive” levels.

“This auction doesn’t guarantee we will achieve everything we want to achieve in terms of competition and price, but I think everything we’ve been doing over the last several years has been leading in this direction,” he said. “This confirms we’re on the right track and we’re certainly prepared to take additional steps if necessary to achieve our objectives.”

Airwaves Auction

Harper’s government has been trying to boost competition in the wireless industry of the world’s 11th largest economy by encouraging new entrants to compete with the nation’s three biggest carriers, Rogers Communications (RCI/B) Inc., BCE Inc. (BCE) and Telus Corp. (T) The policy has created friction with the three incumbents, who produced an ad campaign last year accusing the government of rigging the auction to favor big foreign companies such as Verizon Communications Inc. (VZ)

The auction of airwaves in the 700 Megahertz band restricted the amount of prime spectrum blocks the incumbents could acquire. Rogers purchased 22 licenses for C$3.3 billion, while BCE bought 31 for C$566 million and Telus acquired 30 for C$1.1 billion. Quebecor’s Videotron unit picked up 7 licenses for C$233 million. No foreign carriers bid.

Observers had predicted a smaller windfall for the government after foreign bidders pulled out. New York-based Verizon Communications Inc. said in September it wouldn’t join the auction after expressing interest earlier. Wind Mobile, Canada’s largest new operator, pulled out after its backer, Amsterdam-based VimpelCom Ltd. (VIP), decided not to fund its bid.

Refuting Claims

Harper said the results of the auction refuted the claims of the incumbents and other critics.

“One, they said Canadian companies will not be allowed to bid,” he said. “That was explicit in some of the ads, you may recall -- we were giving the airwaves away to foreigners. The second thing they said was the auction would fail anyway because the kind of competition we sought in the marketplace was simply not possible. The third was, following all this, the government would lose a lot of potential revenue. All three of these things have turned out to be utterly untrue.”

While declining to comment on Quebecor’s specific business plans, Harper said the launch by the company’s Videotron unit of wireless services in Quebec has created “some good market outcomes as far as the government is concerned.”

“The fact that kind of competition may well extend to other key regions is a good thing,” he said.

In addition to promoting lower prices, the government wants to see “good, strong Canadian players” that flourish not only in the domestic market but potentially abroad, the prime minister said.

Harper said the revenues from the auction are unlikely to change the government’s forecast that it will balance its budget in the year beginning April 2015, since the revenues will be booked “over a fairly long timeframe.”

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

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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