Wireless spectrum auction attracts 30 bidders - new and old, big and small

Julian Beltrame, THE CANADIAN PRESS
OTTAWA - The federal government unveiled a list of 30 suitors bidding to become new or bigger players in Canada's $13-billion cellphone market Friday.

The wide interest from both large and small bidders, established cellphone giants and newcomers, offers the potential for reshaping the landscape of Canada's wireless market, currently dominated by BCE Inc.(TSX:BCE), Rogers Communications Inc.(TSX:RCI.B) and Telus Corp. (TSX:T).

Iain Grant, managing director of the SeaBoard Group, a technology consulting firm based in Montreal, estimated the wireless spectrum auction will result in well over a $1 billion for the federal coffers.

"But this isn't about putting money in the government's pocket, it's about letting users keep more money in their pockets because the hope is that this will result in cellphone rates dropping (because of increased competition)," Grant said.

The list of newcomers includes some heavy hitters like Quebecor Media Inc., Shaw Communications Inc.(TSX:SJR.B), and Manitoba Telecom Services (TSX:MBT), who have put between $300 million and $400 billion on deposit to demonstrate their seriousness in becoming major wireless providers.

But it also includes those wishing to be small players in sparsely populated areas, such as SSI Micro Ltd., which hopes to service Nunavut and has put a modest $80,000 on deposit.

And new entrant Niagara Networks Inc. of Toronto, whose bid said it has placed the largest deposit of any applicants at $881.4 million.

In an interview, president Douglas Evashkow would not be specific about the nature of the Niagara Networks, but said his plans are to build a national mobile phone network.

"I can't tell you a lot, there's a lot of strategic things going on right now," he said. Asked what enterprise the firm is involved in at the moment, he replied: "We're preparing to bid in the auction ... I don't mean to be cryptic."

The next deadline for the auction, which begins on May 27, is for the Industry Department to qualify the bidders by March 31, including that they have the means to become cellphone providers and are at least 53 per cent Canadian-owned.

In a statement, Shaw said its $400 million deposit "is intended to provide maximum flexibility in the auction process.

"The company plans to bid on licences as it deems appropriate and cautions against speculation drawing direct correlation about its deposit and its ultimate intention regarding the possible purchase of licences," Shaw said.

Last fall, the government said it was making available 105 megahertz of radio spectrum, including 40 MHz set-aside for new entrants, in an effort to increase competition in the market dominated by the big three.

Bell, Telus and Rogers have also said they are participants, signalling they may want to expand their reach and service. But established providers are limited to 65 MHz of the spectrum, whereas new entrants can vie for all 105 MHz up for auction.

In a speech announcing the rules of the auction last November, Industry Minister Jim Prentice noted that Canada's cellphone usage has the second lowest penetration in the OECD countries, whereas prices are among the highest.

This is the first time the government has held a spectrum auction in this way, and the first time since 1995 that the government made new spectrum available. At that time, Clearnet and Microcell emerged as new entrants, although both were later acquired by Telus and Rogers respectively.

Grant said with cellphone usage increases, there is room for new entrants in Canada. And he said added competition should bring down costs for consumers.

"I think when companies make a comfortable niche for themselves, the tend to maximize the niche to their own benefit," he said.

The Canadian Press, 2008