Competition in Canada’s cell phone industry

By Luann Lasalle, The Canadian Press

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MONTREAL – Bidding has reached more than $4.1 billion in an online auction to open Canada’s cellphone market to more competition, prompting a complaint from one of its participants.

Shaw Communications Inc. (TSX:SJR.B) raised some concerns about the online auction and its costs. “It is interesting to see a process so clearly driven by foreign money,” CEO Jim Shaw said Friday during a conference call to discuss the cable company’s third-quarter results.

“We just hope that when the auction’s over and the bidders are qualified, that they all can recite the words to the Canadian national anthem,” Shaw said.

Shaw president Peter Bissonette then chimed in with the first few notes of the “Hockey Night in Canada” theme.

The Calgary-based Shaw had bid $208.7 million for 25 spectrum licences primarily in Western Canada, said Industry Canada’s website.

Shaw appeared to be making a dig at Toronto-based Globalive, which is also trying to get into the Canadian cellphone market but has financial backing from European and Egyptian telecom investors.

Globalive had bid $433.1 million for 26 licences in many parts of the country and is aiming to be a new, national cellphone player.

However, strict federal regulations prevent foreign telecom companies from simply breaking into Canada with their own platforms and they can only invest a minority stake in a Canadian company.

Shaw didn’t comment on what his company intends to do with the wireless spectrum it has acquired during the auction.

He also said the auction has increased prices for new players to enter the Canadian cellphone market.

“How is that good if your mandate is to deliver quality new products to Canadians? How can you do that when you bring in a whole bunch of people to drive up the price? They’ll have to charge you more.”

The domestic cellphone market is estimated to generate $16 billion in revenues a year and is dominated by Rogers Communications Inc. (TSX:RCI.B), Telus Communications Company (TSX:T) and Bell Mobility Inc. (TSX:BCE).

The big three players and new participants in Industry Canada’s wireless spectrum auction are bidding for more than 250 licences for airwaves over which wireless networks need to operate.

Analysts had originally estimated the bidding would go as high as $2 billion for the 105-megahertz band of spectrum.

Some had believed it might have been winding down when bids recently reached $3.5 billion, but the auction won’t end until bidding halts.

Analyst Carmi Levy said the higher than expected amounts that have been bid will have fallout for all of the players in terms of what they will be able to offer consumers.

“So obviously the more you spend on bandwidth and on the rights to own bandwidth, then the less you have after the fact and that will have implications for the kinds of services we can see and when we will be able to see them,” said Levy of Toronto’s AR Communications Inc.

It will also impact the smaller players that want to build cellphone networks, said Levy, senior vice-president of strategic consulting.

Quebecor Inc. (TSX:QBR.B) had bid $565.1 million for 18 licences primarily in Quebec and parts of Ontario for its Videotron cable service to get a crack at the cellphone business.

“I cannot discuss this subject in more detail, except to tell you that if all goes according to plan, Videotron will build its own network and add third-generation wireless services to its range of products,” CEO Pierre Karl Peladeau said this week at his company’s annual meeting.

Even though bidding is starting to flatten, nobody is giving an inch, Levy said.

“This is the way it’s being played out and they don’t have a choice,” said Levy. “Their only alternative is to fold up their tents and go home and none of them is doing that.”

The big three players were leading bidding on Friday, but they can’t bid on the 40-megahertz of spectrum specifically reserved for new players in the cellphone market.

Dominant player Rogers had bid $946.1 million for 57 licences spread across much of the country with heavy concentration in Ontario.

Telus had bid $800.4 million for 53 licences in and Bell had bid $695 million for 53 licences, both of them bidding in many different parts of Canada.

For his part, Shaw said he’s not worried about losing customers to new independent wireless providers that may emerge once the auction wraps up because it will take them a long time to develop the infrastructure and cultivate customer relationships.

“They might have a billing system, they might have some expertise. They maybe they’ve got lots of money. But it’s that back office that really makes the service work,” he said.

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4 responses to “Competition in Canada’s cell phone industry

  1. Pingback: Their View On Mobile Phones: Competition in Canada?s…. » Mobile Phone Info . net

  2. While having more competition is going to be a very good thing, having so many more regional carriers isn’t such a good thing. For one it will mean a return to paying roaming fees while traveling.

  3. That is true but I think it will be offset by the competition. Like we see in the states, there are the big carriers but also a lot of local ones. However I dont know if there is enough little ones to be able to do it. What I mean is Canada is so wide open between cities it takes a lot of money for infrastructure for nothing. Like in Alberta for instance you can do Calgary and Edmonton but is there enough between the 2 to make it profitable? where as in the States there is enough between New York and say Philadelphia to make it profitable.

  4. There is no competition within the wirless industry in Canada; it is the exact same thing as Air Canada and WestJet – they keep each other in the loop so they all get a peice of the pie.

    Now if real competition was to come to Canada, it would spell the end of the big 3 and that is because they are scammers. It’s common knowledge that we pay some of the highest prices for cell service in the world (top 5) and there is no reason for that at all…..unless the technology that Rogers, Bell and TELUS use is that old…..

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