Is government easing off on spectrum-transfer policy?

Speculation that the federal government is poised to approve the acquisition of Mobilicity and its spectrum by Telus Corp. or Rogers Communications Inc. has some observers disagreeing whether this would represent a major departure for the federal government in its spectrum-transfer policy. Recent reports in the Globe and Mail indicated that both companies have submitted proposals to purchase Mobilicity. An article published Friday quoted letters from Industry Canada that were addressed to Telus and Rogers, indicating that both proposals are so far seen in a positive light by the government. The article said the letter to Telus indicated that its proposal would involve the transfer of Mobilicity's spectrum in the Ottawa area to Wind Mobile. The Globe story quoted Telus spokesman Shawn Hall as confirming a new offer had been put forward by the company for Mobilicity, and that the spectrum offered to Wind Mobile would be free, or could be made available to another company or to Industry Canada for reallocation. When contacted by The Wire Report on Monday, Hall would not comment or confirm what was attributed to him in the Globe and Mail. Rogers' spokesman Aaron Lazarus said in an email Monday that Rogers would not be commenting. This comes after three different attempts by Telus to acquire Mobilicity — which has been in bankruptcy protection since September 2013 — were blocked, including an offer worth $350 million last year. The Globe reported a source close to Mobilicity as saying that a "mild bidding war is going on" currently, and the expected price is anticipated to top $300 million. Joel Shaffer, a spokesman with Longview Communicationsworking for Mobilicity, would not confirm details, saying in an email: “We continue to pursue a going-concern transaction that is in the best interest of stakeholders and we continue to engage with a number of parties. However, we can't comment on the specifics of any potential transaction or the actions of others.” Robert Sauer, a spokesman with Veritas Communications on behalf of Wind, said in an email that the carrier "does not comment on speculation or rumours." Phillip Huang, telecommunications analyst for Barclays Capital, said in a research note Monday that if the reports are true, it would represent a "dramatic shift in policy direction" by the government on spectrum transfers. Aravinda Galappathige, an analyst with Canaccord Genuity, agreed, saying in a research note Monday that such a development would "represent a considerable easing of the Government’s stance that has thus far prohibited the incumbents from purchasing new entrant set-aside spectrum." He said that, even with some of Mobilicity's spectrum reportedly poised to go to Wind Mobile, almost 90 per cent of its airwaves would still be attained by an incumbent, based on what's been reported. On the other hand, RBC Dominion Securities analyst Drew McReynolds said if a deal for Mobilicity as reported gets approved, it would not mark a major departure in government policy. "We do not believe such a deal structure would signal a change in government wireless policy but to the contrary, would be consistent with championing a stronger fourth player," McReynolds said in a note released Sunday. McReynolds said approval of the deal reportedly proposed by Telus would strengthen Wind Mobile's spectrum position, which is consistent with the government's long-standing policy of promoting a fourth wireless player. When asked for comment Monday, Jake Enwright, spokesman for Industry Minister James Moore, said in a phone interview: "As we have always said, we will only approve spectrum-transfer requests that do not decrease competition in the wireless sector." McReynolds said approving a transaction that transfers spectrum from Mobilicity to an incumbent and also a newer entrant like Wind Mobile would not contradict the government's objectives of limiting the concentration of spectrum. With three wireless-auction spectrums held since early 2014 and another slated for August, the government has said the proportion of spectrum in the hands of incumbents has dropped from about 90 per cent to 75 per cent. Scotia Capital analyst Jeff Fan said in a research note Monday that proposals for a Mobilicity acquisition, as reported, could help the government achieve a more efficient use of the spectrum that's held by Mobilicity. He said it's likely that any proposal Rogers submitted also included provisions to transfer spectrum to Wind, and might also include a side deal with Shaw Communications Inc., which has unused spectrum that it purchased in the 2008 AWS auction. Rogers and Shaw announced a deal in January 2013 for the transfer of Shaw's spectrum in Western Canada and northern Ontario to Rogers in a multi-pronged deal worth about $700 million. This deal also included Rogers taking control of Mountain Cablevision in Ontario and Shaw assuming full control of the TVtropolis specialty channel. That spectrum transfer has not yet received government approval, nor has another proposal that would see Rogers buying spectrum from Quebecor Inc. in Toronto for $180 million. Fan said Rogers' purchase proposal for Mobilicity might have an advantage over the competing offer since it could result in under-utilized spectrum from both Mobilicity and Shaw being put to use. Huang said that if Mobilicity's purchase by an incumbent is approved, "it may set a precedent for to monetize their significantly unused and undervalued spectrum by selling to the incumbents." Galappathige said that while gaining spectrum at no cost would be positive for Wind Mobile, that company's main challenge is making the capital investments required to roll out an LTE network. He said recent comments from Wind CEO Alek Krstajic indicate that it will be about another two years before the carrier has an LTE network in operation. Fan said that late 2016 or early 2017 is probably when an LTE network from Wind will materialize, and he agreed that investing the capital required for utilizing the spectrum it already has to launch LTE is "the major barrier it has to overcome." Meanwhile, Obelysk Inc., an investment company controlled by Mobilicity founder John Bitove, said in a press release Monday that it has made a proposal to Industry Canada to purchase Mobilicity's customers, dealers and parts of its infrastructure and run it as a mobile virtual network operator (MNVO), in cooperation with any other potential buyer. It said it is not seeking to block other acquisition proposals that would include Mobilicity's spectrum. Obelysk said this would result in uninterrupted service for Mobilicity's 155,000 existing subscribers, its 150 dealers, call-centre operations and the contractors Mobilicity deals with, as well as maintain jobs for more than 30 full-time employees. The company said it was prepared to fund such a transaction, which would help foster competition by maintaining a fifth wireless carrier in Toronto, Vancouver, Edmonton, Calgary and Ottawa. The industry minister's office declined to comment on Obelysk's proposal. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Is government easing off on spectrum-transfer policy?

News | June 22, 2015

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