Quebecor won’t take mobile service national alone: CFO

Quebecor Inc. is not interested in being Canada's fourth national wireless carrier, at least not by itself. That was the message Quebecor chief financial officer Jean-Francois Pruneau gave to a Canadian Imperial Bank of Commerce investors' conference held in Montreal Wednesday. While discussing options for using the company's spectrum holdings outside of Quebec, Pruneau said: "Building a new wireless network from scratch in the rest of Canada is not among the options considered." The possibilities he mentioned for what to do with the spectrum included selling it outright or partnering with another carrier to utilize it. "We are continuing our analysis but have the firm belief that the spectrum we hold outside the province of Quebec is of great fundamental value," Pruneau said. He said Quebecor has spent about $300 million on spectrum outside of Quebec, "and it's definitely worth more than that" now, noting the rapid growth in demand for wireless data. Quebecor bought spectrum licences for British Columbia, Alberta and southern Ontario in the 700 MHz auction last year, taking advantage of rules imposed by Industry Canada that limited the amount of spectrum that could be purchased by incumbents BCE Inc., Rogers Communications Inc. and Telus Corp. "We just could not pass on the opportunity to acquire high-value spectrum at such an attractive price in Canada's most populated provinces," Pruneau said Wednesday. Quebecor bought more spectrum in these provinces during the 2500 MHz sale that wrapped up in May, focusing on major cities such as Vancouver, Edmonton, Calgary and Toronto. In the AWS-3 auction held in March, Quebecor only bought spectrum in its existing base of Quebec and the Ottawa area. Pruneau said forming a partnership with another company that provides wireless service outside of Quebec is "still an option." He noted that any sale or partnership would involve either an incumbent or Wind Mobile, "and going with Wind could be in cash or it could be securities; then it brings the partnership home." He said Quebecor could "bring value to Wind's operation. Our spectrum is definitely a huge value that we can bring. But we have some expertise. We definitely can combine our purchases of handsets and whatnot, so there's definitely some value that we can bring." Wind chief regulatory officer Bob Boron said in a phone interview he was not in a position to comment. Pruneau recalled that the purchase of Mobilicity and much of its spectrum by Rogers was approved by Industry Canada in June — with parts of that spectrum offloaded to Wind — and a previously reached two-year old deal for Rogers to buy spectrum from Shaw Communications Inc. in Western Canada and northern Ontario was also given the OK by government. He said these transactions "changed the landscape, and now it's possible to believe, even on a short term basis, that transferring the spectrum to an incumbent could be done." Still, limits put in place for last year's 700 MHz auction — during which Quebecor purchased most of the spectrum it holds outside of Quebec — that kept incumbent carriers to no more than one each of the four so-called prime blocks of spectrum in each region were set to remain in place for five years. Officials from the office of Industry Minister James Moore and Industry Canada did not immediately return requests for comment on Wednesday. During a CRTC hearing into the wholesale wireless market last October, Manon Brouillette, president of Quebecor's Videotron division, said lower mandated roaming rates and mandated tower sharing were needed before the carrier would expand its wireless service across Canada. The CRTC's decision from that hearing in May included provisions for lower roaming rates when smaller carriers use incumbents' networks, though no new requirements for tower sharing were introduced. CRTC Chairman Jean-Pierre Blais, who was attending an event in Ottawa Wednesday, declined to comment on Pruneau's comments from earlier that day. Greg MacDonald, telecommunications analyst with Macquarie Capital Markets, said in a phone interview that Pruneau's stated position was not surprising. “My going assumption, based on messages from Quebecor, was that they were never considering a situation where they would have material risk,” he said. Out of all the potential buyers for Quebecor’s spectrum outside of Quebec, the “highest probability” would be a purchase by Wind, he said. “Or they could sell the spectrum to a foreign carrier, such as a T-Mobile or a Sprint . Verizon is even a possibility. It wasn’t too long ago that Verizon had expressed real interest in coming into the market,” MacDonald added. He said Quebecor was “smart” to buy spectrum at a good price and “put itself in the kingmaker’s position in terms of ability to deal that spectrum, either through a sale process or … using it as an investment currency.” MacDonald said this does not mean the government’s goal of achieving a fourth national mobile carrier is dead. “Most people will say it’s failed," he said. "I don’t know how you can draw that conclusion. Wind is funded. They’re going to be building out a 4G network next year. "Quebecor doesn’t seem to be having too much trouble. They’re having a lot of success in Quebec. So what’s failed about it?” Regarding the assumption held by many that Quebecor would become that fourth national carrier, “people drew conclusions they shouldn’t have necessarily drawn based on the numbers, based on the analysis and .” Quebecor’s own statements indicated the company didn’t plan to build its own network nationally, he said. “But people like simple solutions. They draw simple conclusions and I think that’s what happened this time.” — With reporting by Derek Abma at dabma@thewirereport.ca and Anja Karadeglija at akarad@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Quebecor won’t take mobile service national alone: CFO

Broadcast | September 16, 2015

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