Wind auction withdrawal good for Feenix: experts

John Bitove’s Feenix Wireless Inc. could have access to prime spectrum at lower prices following the withdrawal of Globalive Wireless Management Corp., owner of Wind Mobile, from the 700 MHz auction that starts Tuesday, industry experts said. One day ahead of the auction that begins Tuesday, Wind said in a emailed statement that it has withdrawn from the process because its majority owner, Amsterdam-based VimpelCom Ltd., “decided not to fund Wind Mobile’s participation in this auction as it continues with discussions with the federal government and Wind Mobile’s other shareholder, Anthony Lacavera, to craft a path forward that will continue to build Wind Mobile as a strong competitor in the Canadian wireless market.” In a telephone interview Monday evening, Gregory Taylor, a post-doctorate fellow with Ryerson University’s spectrum research group, said Wind’s withdrawal from the auction could be a boon for Feenix Wireless. “The door is open now, because there is going to be that extra block of spectrum, and Wind isn’t going to be there,” Taylor said. “So basically anyone who can come up with … the reserve bid price has the potential now to get in with some pretty amazing spectrum.” Industry Canada said in March 2012 that auction rules that limit large wireless providers to a single block of the best spectrum in each region were designed to serve the department’s policy objective of maintaining four wireless providers in each region of the country. Under those rules, incumbent providers BCE Inc., Rogers Communications Inc.and Telus Corp. are each limited to acquiring a single block of “prime” spectrum in each region of the country, leaving one of the four blocks deemed most suitable for mobile carriers available for a fourth provider. Wind, which currently has about 650,000 subscribers in Ontario, Alberta and British Columbia, was seen as the company most likely to acquire that fourth block of prime spectrum in those provinces. Following Wind’s withdrawal, the incumbents and seven other companies remained on Industry Canada’s list of qualified auction bidders Monday evening, just hours before the auction was scheduled to start on Tuesday. One of those companies is Feenix Wireless, a startup owned by Bitove, the founder and executive chairman of struggling new entrant carrier Mobilicity, which is currently engaged in a court-supervised sale of its assets as part of a bankruptcy protection proceeding. In a telephone interview Monday evening, independent telecom consultant Mark Goldberg agreed that Wind’s withdrawal could open the door for Feenix to acquire the fourth block of prime spectrum at a lower price. Goldberg noted that each of the other auction participants already has a defined service area, and may not be prepared to spend the money required to buy spectrum and deploy wireless networks outside their current operating territories. Like those other companies, he noted, Feenix was required to put down potentially millions of dollars in deposits to register as a bidder in the auction, and will now be unable to use that money for other purposes until after the auction closes, likely within the next two months. “Feenix didn’t withdraw. There’s clearly something that they plan to do, we just don’t know what it is,” Goldberg said. “That doesn’t mean they’re going to bid, but if you didn’t withdraw by noon then your money is tied up until after the whole auction is over,” Goldberg said. Canaccord Genuity analyst Dvai Ghose said in a research note Monday evening that Wind’s withdrawal from the auction leaves no “obvious buyer” to bid on the fourth block of prime spectrum in each of Ontario, Alberta and British Columbia, and that some of the valuable spectrum could go unsold in those regions. He noted that those three provinces account for about 65 per cent of the Canadian population. Ghose noted that while Quebecor Inc.’s Videotron Ltd. subsidiary “may be tempted” to buy spectrum in those regions, it does not currently operate wireless services in those areas and has no other “obvious competitive advantages,” such as cable or home-phone services. “Despite its intentions, it does not look as if the government will see a sustainable fourth wireless player in Ontario and Western Canada,” he said. Scotiabank analyst Jeff Fan said in an emailed statement Monday that Wind’s withdrawal “leaves no path” for a strategic foreign player to gain some of the coveted 700 MHz spectrum to compete against the incumbents. “This is good news for the incumbents,” Fan noted. Fan said he believes VimpelCom will continue to “look for an exit” from the Canadian market, or for solutions to “minimize cash burn.” He noted that Wind could still bolster its ability to serve customers without acquiring 700 MHz spectrum by signing a network sharing agreement with Mobilicity, Videotron or an incumbent. Videotron, he added, is the “most capitalized” non-incumbent bidder that could still bid on the fourth block of prime spectrum in Ontario, Alberta and British Columbia, “and could pick up the licences at cheap prices” to use as leverage in “strategic arrangements” with other players, such as Rogers, with which it already has a network sharing arrangement for the Quebec market. Taylor said the news that Wind is pulling out means the government’s plan to bring competition into the wireless sector “is pretty much on life support.” “This is another nail in the coffin of the federal government’s plan to bring in competition into this sector. It simply has not worked,” he said. Taylor said that in order to become a strong fourth player in Canada, Wind needs access to the 700 MHz airwaves, which are valued due to their propagation characteristics that allow them to carry wireless signals over longer distances and through walls and other obstructions more easily than other spectrum frequencies. “I would think this kind of dashes the hopes of them possibly becoming the fourth national player the government wanted to see,” Taylor said. “The fourth national carrier is absolutely not going to happen.” Jake Enwright, a spokesman for Industry Minister James Moore, said in an emailed statement Monday evening that the government is undeterred by Wind’s withdrawal. “The outcome of the auction will be positive for consumers because high-quality spectrum will soon be available across Canada, providing Canadians with dependable, high-speed wireless services on the latest technologies,” Enwright said. “Whether to participate in the spectrum auction is up to the individual companies. We do not comment on their internal business plans.” VimpelCom spokesman Bobby Leach said in an emailed statement that the company decided to that it was “not going to sponsor or fund Wind Canada’s participation” in the auction as it remains in discussions with the government about Wind’s future. Orascom Telecom Holdings S.A.E., a VimpelCom subsidiary, said in June that it was withdrawing an application to gain formal control of Wind from Lacavera — who currently controls a majority of the voting shares in Wind through his Globalive company. Orascom, which applied in January 2013 for the government’s permission to acquire Globalive, said in a statement at the time that it withdrew its application “after a review process and discussions with the government of Canada.” “We remain in discussions with the shareholder with majority voting rights and the government to craft a path forward to develop Wind Canada as a strong fourth player in Canada,” Leach said Monday in a statement on behalf of VimpelCom. “We hope to have an opportunity in the future to perhaps re-apply and bid on spectrum, should the government decide to re-open another 700 MHz spectrum bid process.” In a statement emailed to The Wire Report, Lacavera said it was “unfortunate” that the company will not be taking part in the auction. “In order to continue offering real choice for Canadian consumers and businesses long-term, Wind needs more wireless spectrum, which is the real estate of our business,” he said. He added that it is “business as usual” with regard to Wind’s operations, even though “today's development leaves us with a spectrum shortfall we must still address.” Wind, which became a wireless service provider after acquiring AWS spectrum in the 2008 auction, said in its statement that there will be “no change” in its day-to-day operations following its withdrawal from the auction. “Wind Mobile remains firmly committed to serving our customers, and we are determined to continue to be a vital influence on mobile competition in Canada.” Feenix's Bitove did not respond to a request for comment. — With reporting and editing by Nicholas Kyonka at nkyonka@thewirereport.ca, Anja Karadeglija atakarad@thewirereport.ca and Derek Abma at dabma@thewirereport.ca --- CORRECTION: An earlier version of this story incorrectly stated the source of Wind Mobile's statement as its website.

Wind auction withdrawal good for Feenix: experts

News | January 14, 2014

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Wind auction withdrawal good for Feenix: experts

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