Canadian carriers seem to be breathing a sigh of relief today as Verizon Communications’ recently announced plans to acquire full control of its wireless assets appear to have diverted the U.S.-based telecom giant’s ambitions from entering the Canadian wireless market.
According to published reports, Verizon CEO Lowell McAdam noted yesterday that Verizon’s move to acquire Vodafone’s 45% stake in Verizon Wireless for $130 billion has removed any current interest in entering the Canadian wireless market.
“At this point in time we’re not interested in entering the Canadian wireless market,” McAdam said according to a report from Canadian radio station CJAD 800 AM.
Those sentiments were backed by a conference call held with analysts and reporters where Verizon management noted any plans for the Canadian market were now off the table.
Verizon was reportedly in talks to acquire a stake in the Canadian wireless market by purchasing beleaguered wireless carriers Wind Mobile and Mobility, with the Wind offer valued at up to $800 million. Verizon has said its interest in entering the market would come ahead of the planned 700 MHz spectrum auction, which if entered and if licenses were acquired, would align with its Verizon Wireless services.
“If you look at the population of Canada, about 70% of that population is between Toronto and Quebec,” noted Verizon CFO and SVP Fran Shammo during the company’s recent second quarter financial results conference call. “That’s adjacent to the Verizon Wireless properties. Again if you look at the spectrum auction, it mirrors up exactly what we launched here in the United States on the 700 megahertz contiguous footprint. So we’re looking at all these but obviously some of the cautions here are the regulatory environment, a foreign investor coming into the Canadian market and what does that mean? So again, cautiously looking at it, not ready to make any announcements today and we continue to explore and have discussions, but at this point it’s just really just an exploratory exercise.”
The Canadian government, which recently postponed the auction of 700 MHz spectrum licenses until early next year, laid out rules for the upcoming spectrum auction in an attempt to attract new entrants into the space that is currently dominated by three operators: Rogers, Telus Mobility and Bell Canada. Those rules will limit the amount of spectrum established carriers can bid on as well as will provide greater scrutiny on any merger and acquisition activity across the wireless space.
The regulations come on the heels of Industry Canada refusing to approve Telus’ $370 million acquisition of regional operator Mobilicity citing the initial requirement that Mobilicity’s 1.7/2.1 GHz spectrum licenses be used by new entrants in the space. At the time of the ruling, Industry Canada said it planned to more actively promote competition in the wireless space, announcing a number of decisions that it said would ensure that consumers have at least four choices in wireless communications across every region of the country. That followed a similar announcement last year to also bring more competition to the country’s mobile space.
Canadian’s largest carriers came out against the regulations, noting such limitations would lower the price for new, foreign entrants to enter the space. Bell Canada noted its biggest concern was with three “loopholes” in the rules, including “preferred access” to spectrum; “the right to piggyback” on current Canadian carrier networks; and the right to acquire “struggling companies in Canada that Canadian companies like Bell can’t buy.”
Rogers’ stock (RCI) was trading up more than 6% early Tuesday, while Telus’ stock (TU) was trading up nearly 7%.
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