Thursday, 15 March 2012

Wind Mobile chief pans new telco rules

Wind Mobile chief pans new telco rules
iain marlow — TECHNOLOGY REPORTER  Wednesday, Mar. 14, 2012 7:51PM EDT
Small wireless companies gained better access to foreign capital in Ottawa’s telecom shakeup, but they lost a significant fight to tilt the rules of the spectrum auction in their favour.
New entrants such as Wind Mobile and Mobilicity had lobbied hard to have the government “set aside” spectrum that only they could bid on. Instead, the Harper government said it would implement a system of “caps” that effectively limit the amount of spectrum that incumbents such as BCE Inc., (BCE-T40.18-0.62-1.52%) Rogers Communications Inc. (RCI.B-T38.77-0.61-1.55%) and Telus Corp. (T-T57.19-0.82-1.41%) can purchase in the auction, which will occur early next year.

That will almost certainly prompt a round of mergers or acquisitions in the sector, industry insiders say, but it may not provide the amount of wireless spectrum necessary for sustained competition in a business that is increasingly about data-intensive, smartphone-oriented mobile broadband networks.
“It’s a total disaster,” said Wind Mobile CEO Anthony Lacavera. “It gives the illusion that the competitive marketplace has been strengthened, but it will be a catalyst for consolidation and new entrants will be starved of frequencies.”
The next spectrum auction is crucial because the licences are far more valuable than ones that have been sold in the past. Spectrum, considered the lifeblood of the wireless industry, are the airwaves over which providers offer service and this type – in the 700 megahertz range – are prized for the ability to penetrate buildings and travel longer distances.
But the new wireless companies gained other advantages in Industry Minister Christian Paradis’s announcement. Most significant is the lifting of foreign investment restrictions for companies with less than 10 per cent market share, which will end Wind Mobile’s legal battle over its foreign funding and permit all smaller companies better access to global capital. The government also strengthened rules that force huge wireless providers like Rogers to share cellular towers with, and offer better roaming service to, smaller rivals.
The moves announced on Wednesday, though historic on the foreign-ownership front, are unlikely to have any significant impact on incumbent telecom stocks, because the changes and this type of auction structure were largely anticipated by the market, says Dvai Ghose, an analyst with Canaccord Genuity. Both Mr. Ghose, and Macquarie Capital Markets analyst Greg MacDonald, suggest that consolidation among new entrants is now much more likely.
The large wireless companies, though, did lose several important lobbying battles. Incumbents such as Telus and Rogers have long argued that foreign ownership rules should be lifted not just for small competitors, but for all telecom players. They had also argued that there should be no limit to how many licences they could buy, and also lost that fight.
Michael Hennesy, Telus's senior vice-president for regulatory and government affairs, praised the government's decision on the spectrum auction but not on foreign ownership. “We are disappointed the government has chosen a partial and asymmetrical approach to foreign ownership and we hope that this is just a first step in the process.”
Bell would not comment on the decision on Wednesday, and Rogers said it was studying the decision.
But although Mr. Lacavera said that “it was incumbent lobbyists that got the upper hand here,” others were not so sure. Stewart Lyons, the president and chief operating officer for new wireless player Mobilicity, greeted the announcement positively, arguing that the government had acted to sustain competition. “I think the government is committed to breaking up the oligopoly,” Mr. Lyons said.
The only clear winner among the Canadian telecom companies is Manitoba Telecom Services Inc., which now has a global market as it seeks partners or buyers for its competitive MTS Allstream business. “It opens up strategic opportunities for us,” said Chris Peirce, MTS’s chief corporate officer. “We’ve been saying for some time that for Allstream, we need a different kind of investment.”

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