Canada Gets Wireless Competition With Mobilicity Deal, Sort Of

Rogers Communications Inc., Canada’s biggest wireless operator, won approval to buy bankrupt rival Mobilicity, a deal that boosts competition but falls short of the government’s original goal of a fourth national carrier.

Rogers is paying C$440 million ($355 million) for Mobilicity and will transfer the majority of the company’s spectrum to Wind Mobile, the country’s fourth-largest carrier.

“The government is lightening its stance a little bit now that the power has shifted to the different players,” David Heger, an analyst at Edward Jones in St. Louis, said by phone. “We still don’t have a definitive fourth nationwide player.” he added.

Canada’s government committed six years ago to reducing wireless prices by supporting the creation of a fourth nationwide carrier to compete against Rogers, Telus Corp. and BCE Inc. Preferential access to spectrum auctions has helped smaller companies gain 25 percent of the nation’s airwaves, but the big three still control 90 percent of the country’s subscribers.

Giving up the wireless frequencies allowed Rogers to win government approval to acquire Mobilicity after Telus had been rejected twice. A bankruptcy court also approved the sale Wednesday.

The deal, backed by Mobilicity creditors Catalyst Capital Group Inc., will be offset by tax losses of about C$175 million. In addition, Rogers will pay C$100 million, as well as down payments, to complete a spectrum acquisition from Shaw Communications Inc. and then pass most of those airwaves on to Wind Mobile.

The risk of regulatory changes for the big carriers is falling, Drew McReynolds, an analyst at RBC Capital Markets, said in a note to clients.

“While the competitive impact of a stronger Wind remains to be seen, we continue to believe the impact should be manageable for incumbents,” McReynolds said.

Spectrum Deployed

The spectrum shift is a win for competition, Industry Minister James Moore said in a statement.

“A new wireless competitor has secured valuable spectrum it needs, and high-quality spectrum that went unused for almost a decade will now be deployed for the betterment of all Canadians,” Moore said.

Both Rogers and Telus were said to be vying to acquire Mobilicity, the brand name of Data and Audio Visual Enterprises Wireless Inc., which has about 157,000 customers in Canada, according to people familiar with the matter.

Rogers rose 1.8 percent to C$43.35 at 4:19 p.m. in Toronto. Telus gained 1.4 percent to C$42.86 and BCE Inc. rose 0.6 percent to C$54.01.

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