Quebecor says it needs regulated roaming to become fourth carrier

Quebecor Inc. said explicitly Wednesday that it intends to become Canada's "fourth wireless competitor," though it needs "a fair and competitive federally regulated roaming policy." The company made the assertion in a press release that was issued at about the same time as its CEO Pierre Dion was making the closing keynote address to the Canadian Telecom Summit in Toronto. "The stage is set for the dawn of a new era of consumer choice and real wireless competition, for new low-cost wireless services which benefit Canadian consumers, small businesses and the Canadian economy at large," Dion said in a prepared text of his speech published on Quebecor's website. "The key unresolved issue is the wholesale roaming prices charged by incumbents to new-entrant competitors." Dion added that "we are contemplating the possibility of consolidation with one or two of the undercapitalized new wireless entrants. If completed, this would allow us to almost triple our customer base." He was presumably referring to Wind Mobile and Mobilicity, which, along with Public Mobile and Quebecor's Videotron unit, were the new wireless operators to emerge from 2008's AWS spectrum auction. Public Mobile has since been bought by Telus Corp. Mobilicity is in bankruptcy protection. Telus recently confirmed that it has withdrawn its $350-million bid for Mobilicity, under apparent pressure by the federal government. The CRTC is in the midst of a review of the wholesale wireless market and, separately, another on the prices wireless carriers charge one another. The federal government has included provisions in its budget bill, C-31, to cap domestic roaming fees carriers charge one another to no more than what they derive from retail usage of such services. That's meant to be an interim measure until the CRTC decides if it will introduce permanent regulation of domestic roaming fees. It has been anticipated that Quebecor would expand its Videotron wireless service beyond Quebec and the Ottawa region since it spent $233.3 million on spectrum in this year's 700 MHz auction, securing bandwidth throughout British Columbia, Alberta, and southern and eastern Ontario. Dvai Ghose, a telecom analyst with Canaccord Genuity, said in a research note Wednesday that, despite Dion’s comments, he doesn’t expect a definite decision from Quebecor on expanding its wireless service throughout Canada “in the very near term,” largely because the outcome of the CRTC’s wireless wholesale review is not expected until the spring of next year. Ghose added that relying on government action could be a tricky strategy for Quebecor, given the “lack of consistency” the federal government has shown toward wireless policy. He cited the government’s continued efforts to block sales of AWS spectrum from Mobilicity even after a five-year moratorium has expired. He also noted an inconsistent direction the government has taken toward foreign companies seeking to control Wind Mobile. He said the federal election coming up next year, and the fact that Quebecor’s controlling shareholder Pierre Karl Péladeau has come out as an “avowed Quebec separatist” and Parti Québécois legislator creates more potential for “regulatory uncertainty.” Jean-Francois Mezei, a Montreal-area telecom consultant with Vaxination Informatique, said in a phone interview Wednesday afternoon that Videotron has different options when it comes to using the spectrum it purchased in the 700 MHz auction. The company could roll out its own network, purchase Wind or Mobilicity or both, and add antennas for the 700 MHz network to their networks. Alternatively, it could negotiate a comprehensive network-sharing agreement with Rogers Communications Inc., like the one they already have in place in Quebec. Mezei noted it took three years for Quebecor to reach that agreement with Rogers. “I have to assume it’s going to be a while negotiating with Rogers if they are going that way, and in order to help the negotiation, if they can also get the government to impose lower roaming rates, that helps with their negotiating,” he said. The only conclusion that can be drawn from Dion’s speech is that “Videotron is interested in selling retail wireless services in the rest of Canada,” he said. Mezei added that while Quebecor has expressed interest in Wind in CRTC filings in the past, they haven’t publicly mused about buying the company. “This may be the first time they publicly say so,” he said. “It’s not a surprise, because the hints have been there, and it’s a logical avenue for them to pursue.” Quebecor said in Wednesday's press release that it has spent $1.6 billion on wireless spectrum and networks to date. In his speech, Dion said the wireless incumbents — Rogers, BCE Inc. and Telus — categorize any regulatory action to improve competition in the wireless sector as "giveaways" or "concessions" to newer entrants. He estimated that, before the era of expensive auctions like this year's 700 MHz and the 2008 sale of AWS spectrum, the incumbents managed to gain free spectrum that would be worth about $5.1 billion at today's rates. Ghose said that if the government’s focus is to encourage new wireless competitors to have their own spectrum and networks, “Videotron will have to eventually build its own networks outside Quebec and incur major losses.” He added that other factors working against a possible expansion by Quebecor outside of Quebec include a recent trend in other world markets for the number of wireless carriers to shrink from four to three, the lack of other services Quebecor offers outside its home province to create bundling deals, and the fact that its wireless performance in Quebec is not impressive based on its market share and average revenue per user. Mezei said an interesting aspect of Dion’s speech was Videotron’s pitching itself as a low-cost carrier, noting this is “good PR” for the company. “In Quebec, their pricing matches the flanker brands, Fido, Kodoo and Virgin, so I have to assume that’s going to be the same in the rest of Canada as well,” he said. Videotron’s move to make their intentions clear so publicly — as opposed to, for example, putting pressure on the government privately to lower roaming rates— also has a PR element, said Mezei. He noted the company wants to counter the bad publicity it received when Péladeau decided to run for the Parti Québécois in Quebec’s provincial election this spring. “Saying we’re going to go in the rest of Canada and offer you lower rates is a good PR thing to fix that image,” he said. “And it’s also a way for them to build their name outside of Quebec, saying ‘Hey, we promise to come save you from the big bad incumbents.’ ” He said it benefits the government, whose policy to bring a fourth carrier into every region of the country has lagged as the other three new entrants from the 2008 auction have struggled. “Doing this public PR is saying ‘Dear government, we’ll save your four-carrier policy,’ ” said Mezei. — With reporting and editing by Anja Karadeglija at akarad@thewirereport.ca and Derek Abma at dabma@thewirereport.ca

Quebecor says it needs regulated roaming to become fourth carrier

News | June 18, 2014

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Quebecor says it needs regulated roaming to become fourth carrier

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