Delays in 700 MHz auction process increasingly likely, analysts say

Delays in Industry Canada's spectrum auction process are looking more likely by the day, analysts said. They said new wireless entrants will need more time to look at consolidation options after Industry Minister Christian Paradis announces changes to the rules for spectrum transfers, expected as early as this month. Those rules, which Paradis has said will be issued before the next wireless auction, are expected to clarify whether the struggling new entrant carriers can sell their operations and spectrum holdings to incumbents BCE Inc., Rogers Communications Inc. or Telus Corp. The auction period officially starts June 11, when companies seeking to participate in it must submit applications. If they do submit applications, the auction rules do not permit bidders from merging or holding acquisition talks until the auction is finished, probably in late November or December. The new entrants will need more time to evaluate their plans after the release of the spectrum transfer rules, and that may push back the June 11 deadline and the entire auction, Canaccord Genuity analyst Dvai Ghose said in a phone interview. “I think they have almost no choice but to extend that one,” he said of the June 11 deadline. “They’re thinking: ‘Great, I’ve got two weeks to come up with plan B or I can never buy 700 MHz spectrum.” New entrants could still consolidate and avoid the auction rules by not participating in it, The Wire Report reported last week. According to the auction rules, bidders are permitted to merge with non-bidders, provided they do so at least 10 days before bidding is scheduled to start on Nov. 19. Macquarie Capital analyst Greg MacDonald agreed, saying that, following the release of the transfer rules, the new entrants will need more time to make possible revisions to their strategies. Last week, Telus announced a $380-million deal for new entrant Mobilicity, operated by Dave Wireless Inc., and MacDonald said in a subsequent research note that he thinks the acquisition is “unlikely to be approved” due to Paradis' policy objective of ensuring four competing wireless carriers in each region of Canada. If the deal is blocked, he said in the note, it would force Industry Canada’s hand to deny Rogers's proposed purchase of unused new entrant spectrum from Shaw Communications Inc. for $325 to $350 million. BCE and Rogers are also in talks with new entrants, The Wire Report reported last week. Mobilicity would be likely to merge with Wind Mobile (owned by VimpelCom Ltd.) if Telus' proposed purchase is blocked, MacDonald wrote, another possible transaction for which “Industry Canada may delay the spectrum auction dates to facilitate such a deal.” Gregory Taylor, a post-doctoral fellow with the spectrum policy research group at Ryerson University, said Industry Canada should delay the auction to give the new entrants more time. “I think that if we’re really serious about having competition in this sector in Canada, we’ve got to let some of this stuff play out,” Taylor said. Telus and Mobilicity said in releases Thursday that Mobilicity's debtholders approved its acquisition plan under terms set out by an order from the Ontario Superior Court. The deal is conditional on regulatory approval by Industry Canada. Mobilicity said it will now seek court approval of the transaction, under which it would become a wholly-owned subsidiary of Telus. A court hearing for that approval is scheduled for May 28. A debtholder vote on Mobilicity's recapitalization plan, which the company would proceed with if the Telus deal is denied, has been postponed to a later, undetermined date, Mobilicity said. In an email statement Thursday, Industry Department spokesman Michel Cimpaye did not respond to questions about whether the June 11 deadline for applications or the Nov. 19 auction start date will be pushed back. “As noted in the Consultation on Considerations Relating to Transfers, Divisions and Subordinate Licensing of Spectrum Licences, it is the Government's intention to release a final decision on the proposed policy ahead of the 700 MHz auction,” Cimpaye said. “The consultation was completed earlier this month, and we plan to finalize the approach shortly." —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

Delays in 700 MHz auction process increasingly likely, analysts say

News | May 23, 2013

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Delays in 700 MHz auction process increasingly likely, analysts say

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