Canada Sets Aside More Spectrum for Small Wireless Firms

The Canadian government took another step in its more than six-year effort to create a fourth national wireless operator by setting aside additional airwaves for smaller carriers such as Quebecor Inc.

The government will provide a 30 megahertz block of advanced wireless services -- or AWS -- spectrum before a separate auction in April of airwaves in the 2500-megahertz band, according to a statement today from Industry Minister James Moore. There will be “strict provisions” on the transfer of the spectrum to bigger carriers, Moore said.

Earmarking the airwaves for smaller operators is the latest effort by Prime Minister Stephen Harper’s government to establish a fourth major national competitor in an industry dominated by three incumbent carriers. Montreal-based Quebecor, which said last month that it’s ready to become Canada’s fourth national carrier, qualifies for the spectrum, Moore told reporters today at a press conference.

“It’s a very positive development,” said Tony Lacavera, chief executive officer of Wind Mobile, a new entrant in wireless with more than 735,000 subscribers in Canada. “The government came out now with a policy on AWS-3 that ensures that spectrum gets into the hands of an operator -- not a speculator, but an operator -- that’s going to use this and compete with the big three and offer Canadians more choice in wireless.”

Incumbents Decline

Shares of Telus Corp., BCE Inc. and Rogers Communications Inc., which control about 90 percent of Canada’s wireless market, all declined today.

The block is being set aside for wireless carriers with less than 10 percent of the national market and less than 20 percent of market share among provincial wireless subscribers, Moore said in the statement.

“Today’s announcement will help new entrants acquire valuable new spectrum to help expand their networks and deliver fast, reliable service to Canadians,” Moore said in the statement.

Quebecor, which runs the country’s third-largest cable operator and has a mobile-phone business in the French-speaking Quebec province, took a step closer to becoming a national wireless operator in February after spending C$233 million ($218 million) to buy airwaves across the country. CEO Pierre Dion said last month that his Videotron brand is ready to become the fourth competitor under the right conditions, including “fair” roaming charges that are federally regulated.

Competitive Struggle

The government has imposed interim caps on wholesale roaming rates pending the regulator’s decision.

Martin Tremblay, a spokesman for Quebecor, said the company is analyzing Moore’s announcement and doesn’t have an immediate comment.

Up until now, new entrants have struggled to make inroads against the three larger incumbents. On the eve of the government’s spectrum auction in February, Amsterdam-based VimpelCom Ltd. pulled out of the sale, dashing hopes that its support for Toronto-based Wind Mobile would provide the roots for a fourth competitor. Last year, Verizon Communications Inc. had expressed interest in entering the Canadian market before deciding against it.

Wind’s Lacavera said he will “circle the wagons” to find financing to bid for the set aside spectrum.

“Obviously, I’m optimistic given the operational success of Wind,” Lacavera, whose Wind Mobile is the brand name of Globalive Wireless Management Corp., said by phone.

Roaming Rates

The spectrum auction still doesn’t resolve a key issue for smaller players -- the roaming rates being charged by large wireless providers. Quebecor’s Dion said last month that roaming charges will be a “decisive factor” in whether the company can become a national operator.

Canada’s telecommunications regulator is reviewing whether wholesale roaming rates are giving the phone incumbents an unfair advantage, with hearings set to start in September.

“We accuse the government of putting the cart in front of the horse,” Dvai Ghose, an analyst at Canaccord Genuity Group Inc., said in a phone interview. “Surely, if roaming is going to decide if they want to go national, you should give out roaming rules before auctioning the spectrum.”

Quebecor shares closed up 0.5 percent to C$26.06 today in Toronto trading.

Rogers shares fell 1.5 percent to C$42.36, the lowest closing price since April 25. BCE dropped 0.6 percent to C$48.21, and Telus declined 1.6 percent to C$39.28, a two-month low.

Before it's here, it's on the Bloomberg Terminal.