Shaw to fight for spectrum sale to Rogers for competitive reasons, analysts say

Shaw Communications Inc. will fight to sell its AWS spectrum to Rogers Communications Inc. instead of a new entrant carrier, industry analysts say. Shaw, which acquired AWS “set aside” spectrum as a new entrant carrier in 2008, said in January it had reached a deal giving Rogers, an incumbent, an option to buy that spectrum when a moratorium on transferring it to incumbents expires in September 2014. Industry Minister Christian Paradis said last week that the government is consulting on new rules for spectrum transfers, and confirmed that the Shaw-Rogers deal will be subject to the new framework. “I think Shaw will pursue this transaction for as long as they can before they would even think about selling ,” Scotia Capital analyst Jeff Fan said in a phone interview, adding that it would be against Rogers' and Shaw's interests to empower a new wireless competitor in Western Canada with the spectrum licences. “I’m not sure Shaw is going to try to introduce new wireless competition that’s going to hurt its partners.” Fan said the two cable companies appear to have a good relationship right now and that, if Industry Canada blocks the transfer, the companies will try to find another way to complete the sale. Shaw may prefer to sit on the spectrum instead of transferring it to a new competitor, he said. If Industry Canada blocks the spectrum transfer to Rogers, the companies could attempt to challenge the decision in court. Industry Canada says its spectrum management policy is to encourage a fourth wireless player in every market in Canada. Macquarie Capital Markets analyst Greg MacDonald said in a phone interview that allowing the Rogers-Shaw deal to proceed would lead to a concentration of Western Canada spectrum in the hands of incumbents Rogers, BCE Inc. and Telus Corp. “There is no doubt in my mind that Industry Canada’s preference is that a transfer from Shaw to Rogers does not happen,” MacDonald said. “At the very least, I think it’s safe to say that option structures are probably to be challenged by Industry Canada.” The government also wants to see the spectrum used for mobile services, not for it to sit fallow, he said. MacDonald and other analysts contacted by The Wire Report said new entrant carriers Wind Mobile, owned by VimpelCom Ltd., and Mobilicity, owned by DAVE Wireless Inc., would be interested in acquiring the Shaw spectrum. An industry source close to Wind said the company “maintains an interest” in Shaw’s spectrum. Maher Yaghi, a telecom and media analyst with Desjardins Securities in Montreal, said the new entrants lack the capital to buy Shaw's licences, which Rogers agreed to purchase for $325 million to $350 million, including $50 million for the option. The licences cover Alberta, British Columbia, Saskatchewan, Manitoba and northern Ontario. MacDougall, MacDougall & MacTier telecom analyst Troy Crandall said he believes the government’s new rules on transfers, when in place, will allow the Rogers-Shaw deal to proceed after the moratorium on transfers to incumbents expires in September 2014. Blocking the deal would send a bad signal to investors because it would represent a change to the rules on the moratorium, he said. “To just outright change the rules so they could block that purchase, I don’t think they could come out with a rule like that,” Crandall said. “That just wouldn’t go over well with global investors and global capital providers.” Crandall said he believes the new rules on spectrum transfers will attempt to restrict or deter future efforts by the incumbents to secure spectrum awarded to new entrants, or that would give them a dominant share of spectrum holdings in a market. Shaw did not respond to a request for comment for this story. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.caand editing by Simon Doyle at sdoyle@thewirereport.ca

Shaw to fight for spectrum sale to Rogers for competitive reasons, analysts say

News | March 12, 2013

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Shaw to fight for spectrum sale to Rogers for competitive reasons, analysts say

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