AWS-3 results provide Wind with ‘secure, clear roadmap for LTE’: Lacavera

Wind Mobile will work to roll out LTE connections on its network by the end of 2016, as long as the technology to take advantage of the AWS-3 spectrum it picked up in this week’s auction is ready, Wind chairman Anthony Lacavera said Friday. The results of the March 3 auction were announced by Industry Minister James Moore at a Friday morning event in Toronto, with Wind adding three AWS-3 licences in southern Ontario, Alberta and British Columbia for $56.4 million. “This is obviously a very positive development in terms of getting us a secure, clear roadmap for LTE in 95 per cent of our coverage area,” Lacavera said in a Friday phone interview. Thirty of the 50 MHz available in the auction were set aside for operating new entrants, including Wind, Mobilicity, and Quebecor Inc.-owned Videotron. Lacavera said handset makers and chip manufacturers should have the beginnings of an AWS-3 ecosystem on the market by the end of this year. The timeline is not final and is subject to the development of technology that is not yet on the market, he said, but Wind still intends to overlay LTE on its existing network as soon as it is viable. Once Wind Mobile has deployed LTE on its own network, Lacavera said, the company will be able to use LTE domestic roaming on other carriers’ networks. Wind was eligible to bid on the set-aside spectrum in the Ottawa region, including parts of Ontario and Quebec, but Videotron ended up with the AWS-3 licence for that area. Lacavera would not comment on Wind’s future spectrum plans, citing the mandatory quiet period before the 2500 MHz auction that begins April 14. Moore said in the news conference Friday that the auction rules, including the set-aside, were meant to help consumers. “For us, it's achieving those multiple goals: reserving capacity footprint for more competition in the future; yes, obviously having return for the government; and, in the long term, ensuring that our wireless sector remains competitive,” he said. The auction raised $2.11 billion for the government. Of the 10 qualified bidders in the AWS-3 auction, Rogers Communications Inc., Manitoba Telecom Services Inc., Saskatchewan Telecommunications Holding Corp., TBayTel Inc. and Mobilicity all came away without any new spectrum. On the block was 50 MHz of paired AWS-3 spectrum on the 1755-1780 MHz and 2155-2180 MHz frequency bands, of which 30 MHz was set aside in paired blocks for operating new entrants. Incumbent and regional carriers that did not meet the government’s definition of new entrants had the opportunity to bid on 20 MHz of spectrum in two paired blocks in each of 14 regions across the country. Canaccord Genuity analyst Dvai Ghose said in research note that it will likely be two to three years before AWS-3 can be put into use for networks and devices, meaning "this auction should not have any near term operating impact on the wireless industry.” Ghose wrote that despite Wind's success in securing a lot of AWS-3 spectrum at a "bargain basement price," it is unclear how the company will finance a network build-out he estimates will cost $1.5 billion. Lacavera called Ghose’s estimate "categorically wrong," He said the cost of adding LTE to Wind's network is between $300 and $400 million, including spectrum costs. He added that Ghose also overestimated the timeline for AWS-3 devices coming onto the market. "Every manufacturer is talking about six, 12, 18 months," Lacavera said. Ghose later qualified his cost estimate for Wind's network build to say it includes, not only network upgrades, but also costs for things such as subsidizing the high-grade smartphones that will be used on an advanced network. Paul Goodrick, a policy analyst with Canadian Spectrum Policy Research, said in a Friday phone interview that it would take about two years before devices, network equipment and software upgrades allow carriers to take advantage of AWS-3. Canadian carriers brought the 700 MHz spectrum they bought last year online within months of the auction, he said, because much of the infrastructure to take advantage of it was already in existence because the United States had auctioned off its own 700 MHz spectrum in 2008. With AWS-3, Goodrick noted, Canada is only about a month behind the U.S. in making that spectrum available to wireless carriers. "Because the U.S. hasn't deployed and it's a new band opening up globally, there's not equipment for it," he said. Scotia Capital analyst Jeff Fan said in a research note that Wind might not roll out LTE service until 2017 or so when the AWS-3 spectrum become serviceable. However, he added that it could upgrade service earlier if it is able to purchase AWS-1 spectrum from companies such as Shaw Communications Inc., Quebecor or Mobilicity. Lacavera would not comment on the likelihood of buying spectrum from other companies. Due to the auction’s sealed-bid format, winners of the individual licences paid the second-highest bid or, if there was no second bid, the minimum reserve price. Telus Corp. was the biggest spender, paying $1.51 billion to pick up 15 licences covering a population of 30 million people including two blocks each in Quebec, Manitoba, Saskatchewan, Alberta, British Columbia and the Ottawa region, as well as a single block in southern Ontario. In a press release from Telus, the company said its 15 new licences of AWS-3 would complement the AWS it bought in the 2008 spectrum auction. “AWS-3 spectrum is well-suited for delivering both coverage and added capacity in urban and rural environments,” the company said. “Telus expects to incorporate it into the natural evolution of the company's existing network, accelerating Telus’ ability to bring new devices to market and deliver economies of scale on wireless infrastructure investments.” The release quoted Telus executive chairman Darren Entwistle as saying the company has invested $3.8 billion in spectrum since the 2008 AWS auction. “Given the significant investment made by U.S. carriers, Telus is optimistic that the AWS-3 handset and network ecosystem will develop at an accelerated pace, allowing Telus to quickly put this spectrum to use for our customers,” Entwistle said. Besides Telus, BCE Inc. was the only other winner of open blocks, paying $499.9 million for 13 licences covering a population of 13.5 million people in the northern Quebec, northern Ontario, the three northern territories and the Atlantic provinces. Bell and Telus, which have a network-sharing agreement, split the two open blocks in southern Ontario. Bell said in a press release that its 13 licences would keep it at the “forefront of wireless broadband development” and claimed that its LTE network is now the country’s largest. “We look forward to putting this highly efficient spectrum to work for our customers as quickly as possible,” chief technology officer Stephen Howe said in the release. “We've already implemented super-fast LTE Advanced services in select areas and look forward to further expansion as we take 4G LTE to more communities in every region of Canada.” The company said it has invested more than $7 billion into its wireless network since 2007, and the new bandwidth would be used to serve the needs of data-hungry consumers. "Advancements in mobile services drive Canadian innovation and productivity," Bell Mobility president Wade Oosterman said in the release. “These efficient new airwaves ensure Bell has the network capacity to deliver the infinite range of new mobile video, banking, social media, gaming, and other consumer and business apps with unparalleled on-the-go data speeds.” Rogers spokeswoman Patricia Trott, addressing her company's lack of AWS-3 purchasing, said the company won the “beachfront property” spectrum it wanted in last year’s 700 MHz spectrum auction, when it spent $3.29 billion of the $5.27 billion raised in that auction. “Some AWS-3 spectrum would have been nice to have when it’s usable in a few years, but we’re comfortable we can continue to meet our customers’ need for speed and capacity now and in the future,” she said in an email. Moore said during the press conference that Rogers currently holds about one-third of the available spectrum used for wireless communications in Canada. RBC Dominion Securities analyst Drew McReynolds said in a research note Friday that while it was a "surprise" Rogers did not end up with any spectrum, the company “has the most spectrum and the weakest balance sheet among the three large wireless operators and thus was likely the least aggressive.” McReynolds said Telus has the least amount of spectrum of the three incumbents along with the best balance sheet, and it and was looking at the AWS-3 auction and next month's 2500 MHz spectrum sale as opportunities to catch up. Fan said Telus spent three times what he was expecting in this auction, while he also anticipated Rogers would purchase about $900 million worth of spectrum. Wind Mobile paid the minimum price for its licences in southern Ontario, Alberta and British Columbia that cover a population of 18.1 million. Mobilicity was the only other carrier that qualified for the set-aside spectrum in those areas. "Mobilicity chose not to participate in the auction, and I will entirely leave it them to explain their reasoning why," Moore said Friday morning. Mobilicity officials, including chief restructuring officer William Aziz and media spokesman Joel Schaffer, would not comment on the company’s lack of AWS-3 participation when reached by phone on Friday. A Financial Post report this week indicated Mobilicity might have lost a $200-million financing deal for bidding in the auction just minutes before the Tuesday deadline for bids to be submitted to Industry Canada. Mobilicity has been in creditor protection since September 2013. The government has vetoed three different takeover attempts by Telus because of concerns about spectrum concentration. “Our spectrum-transfer policy is very clear, as a government,” Moore said Friday, pointing to the 25 per cent of the wireless spectrum that the government has made available to new entrants since 2008. “We don't want to see that reserve of capacity shrink, and that's why we've taken the actions that we have on our spectrum-transfer policy.” Videotron spent $31.8 million on four licences in Quebec and the Ottawa region, covering 9.9 million people. Quebecor CEO Pierre Dion said in a press release that the company’s four new AWS-3 licences solidify it as the fourth carrier in Quebec and the Ottawa region. “This spectrum is ideal to support continuing roll-out of mobile services that deliver the full benefits of LTE technology,” he said. “Increased competition between four carriers can only benefit consumers, who will be the big winners.” Bragg Communications Inc.-owned Eastlink picked up the three set-aside spectrum licences in the Atlantic as well as a licence in northern Ontario for $10 million. Eastlink was the only qualifying bidder for the AWS-3 available in Newfoundland and Labrador, Nova Scotia, Prince Edward Island and New Brunswick for which the minimum bid was $4.1 million. For the remaining northern Ontario set-aside block, on which both Eastlink and TBayTel qualified to bid, Eastlink appears to have paid slightly less than $5.9 million, well above the $1.2-million minimum bid. In an email, Eastlink spokeswoman Jill Laing said the company was “pleased” with the results of the auction. “We are pleased that the Canadian government supports greater competition in the wireless market by making this wireless spectrum available to providers like Eastlink,” Laing said. “AWS-3 will allow us to build upon our award-winning LTE network, delivering even faster speeds as we expand our service throughout Atlantic Canada and northern Ontario." Blocks of set-aside AWS-3 spectrum in Manitoba, Saskatchewan and the northern territories had no qualified bidders under the department’s definition, and that spectrum remains under the control of Industry Canada. Craig Lawrence, a spokesman for MTS, said in an email that the company had no comment on the auction. SaskTel vice-president of corporate affairs John Meldrum said in a phone interview that his company was not surprised to be outbid by Telus for the AWS-3 available in Saskatchewan. “Anytime you're in an auction, you're disappointed if you don't come away with what it was you were bidding on, whether you go to an antique auction or you're chasing spectrum,” he said. Meldrum said SaskTel is in a “decent” position with regard to its spectrum holdings, but more would help the company compete with the big three incumbents. SaskTel is not eligible for the upcoming 2500 MHz auction, he said, because it already holds used spectrum in that band. He said he hopes the government will re-examine SaskTel’s case for the 30 MHz of AWS-3 spectrum that was set aside in the auction and give the company a chance to bid on it at some point in the future. “At some point, will sell that spectrum,” Meldrum said. “As to what process they use, we think that the needs of the new entrants aren't that much different than the incumbent fourth carriers.” Meldrum said SaskTel fulfills the government’s stated goals of lower prices, more competition and better service from a fourth wireless competitor, and therefore deserves the same kind of opportunities as other small carriers. “We are going up against three very large incumbent carriers and that is not an easy task at all,” he said. “The new entrants are bigger than we are, and we're competing against the same monolith are.” — With reporting by Peter Henderson at phenderson@thewirereport.ca and reporting and editing by Derek Abma at dabma@thewirereport.ca CORRECTION: A previous version of this story gave an incorrect date for the auction.

AWS-3 results provide Wind with ‘secure, clear roadmap for LTE’: Lacavera

News | March 6, 2015

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