Wholesale decision positive for Bell, Rogers, Telus: analysts

Financial market analysts say Canada's incumbent wireless operators were generally left undamaged in this week's decision by the CRTC to regulate the rates they charge smaller domestic competitors for roaming access. Scotia Capital analyst Jeff Fan said in a research note issued Wednesday that the CRTC ruling was "favourable to the Big 3," in reference to BCE Inc., Rogers Communications Inc. and Telus Corp. Fan noted that nothing changes immediately regarding the rates incumbents charge smaller carriers, and he expects it will take at least a year to establish the final tariffs. The CRTC has given incumbents until Nov. 4 to file tariff proposals. Given the uncertainty regarding wholesale roaming rates until the tariffs are established, Fan said Wind Mobile, which is attempting to grow its market share in Ontario, British Columbia and Alberta, might have trouble raising capital in the meantime. He added that Quebecor Inc. will likely sit on its spectrum holdings outside Quebec until final tariff rates are established, instead of using them in co-operation with Wind. Fan also said the CRTC’s move not to require carriers to provide wholesale access to mobile virtual network operators (MNVOs) will "likely push back" such players from entering the Canadian market. He said the new tariffs, once established, would result in significant decreases in the roaming rates incumbents can charge their smaller competitors. For example, he said the current data rate of 3.7 cents per megabyte is likely to fall about 1.2 cents. Barclays Capital analyst Phillip Huang said in a research note issued Tuesday night that the fact the CRTC decision will base wholesale rates on the incumbents' costs rather than their retail prices is good for the major carriers. He said a "cost-plus" approach is "more stable" and "provides greater cost certainty" than a "retail-minus" model. He added that factors such as a lack of provisions for MNVOs and the fact the current pricing remains unchanged for the time-being works out in the incumbents' favour, as does the fact the CRTC's decision does not require seamless roaming (guaranteeing that calls are not dropped when moving between networks) or tower sharing. Huang said Quebecor is still likely to be considering a national expansion and eying a partnership with Wind, adding that the "CRTC decision is likely a relative disappointment for Wind." He said: "The CRTC decisions do very little to help Wind accelerate its offering or increase its immediate addressable market (e.g. to take advantage of double cohort opportunity), in our view." Wind Mobile issued a press release after Tuesday's decision that said it would "lead to better, stronger competition for Canadian consumers." Quebecor said in a press release Wednesday that it would "participate in the regulatory process established by the CRTC and hopes that it will be completed quickly. The final rates set by the CRTC will be decisively important for the viability of genuine competition." Drew McReynolds, analyst for RBC Dominion Securities, said in a research note Tuesday night that the CRTC's decision was "very balanced" and "should be manageable for the incumbents." Positive elements for the major carriers, he said, included the lack of mandated access for MNVOs, the cost-plus approach to establishing tariffs, the lack of new tower- or site-sharing rules and the absence of requirements to provide seamless roaming. McReynolds added that he believes the decision will still allow for a fourth national wireless player to emerge sometime over the next year and a half, and that "we believe the conditions for further wireless consolidation and/or recapitalization continue to improve." However, he said the decision was likely a setback for Quebecor's national wireless ambitions because of the lack of new rules to guarantee tower sharing and seamless roaming. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Wholesale decision positive for Bell, Rogers, Telus: analysts

News | May 6, 2015

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Wholesale decision positive for Bell, Rogers, Telus: analysts

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