Quebecor spectrum sale has ‘broad implications’: Barclays

Quebecor Inc. has sold Videotron's AWS-1 spectrum in the Greater Toronto Area to Rogers Communications Inc., in a move that some analysts say is positive for Quebecor and has implications for future spectrum transfers. The deal, announced Friday and expected to close in the “coming days,” is worth approximately $184 million and has been approved by the regulatory authorities, including Innovation, Science and Economic Development Canada (ISED). ISED said on its website Friday that it received the application to move the spectrum in November. “ISED has determined that the requested Licence Transfer will not impact the ability of existing or future competitors to provide services given that the transfer will not significantly change the post-transfer concentration of commercial mobile spectrum in the affected licence area,” it said. Barclays Capital analyst Phillip Huang said in a Friday note that the deal has “broad implications,” with “important signaling value on the current government's position regarding spectrum concentration, and potential future spectrum transfers.” He added that this is the first time a “Big 3 operator” has been allowed to acquire “new entrant spectrum outright with no strings attached.” The only other deal involving an incumbent and new entrant spectrum, Huang continued, was when Rogers acquired Mobilicity — now shuttered — in 2015, which required a portion of Mobilicity's spectrum to go to Shaw Communications Inc.'s Freedom Mobile (then Wind Mobile). “We believe the current government allowing greater flexibility for spectrum concentration is most positive for , as it increases options in monetizing its remaining non-core spectrum and thus potentially realize greater valuations on a sale,” Huang said, adding it’s also positive for the trio of incumbents because it means “less intrusive regulation and allows more efficient use of available spectrum.” The proceeds from the sale will fund Videotron's “ongoing network investment plans in Quebec and Eastern Ontario,” which include an “aggressive 4G network expansion and densification, anticipated 5G network deployment and upgrades to the company's Internet Protocol (IP) wireline network,” the company said in a Friday press release. Huang said the company could also redeploy the proceeds to increase its stake in its Quebecor Media branch. Huang previously said that the sale to Rogers would be the next event to watch and could establish how Quebecor could monetize its non-core assets and indicate conditions for the 600MHz auction, which he expects to be held in 2019. In his own Friday note, Desjardins Capital Markets analyst Maher Yaghi said the sale is “somewhat positive” for Quebecor seeing as it sold the spectrum for a premium to what he estimates as the $100 million it originally spent. Yaghi also said Shaw could scoop up Quebecor's remaining 700 Mhz and 2,500 MHz spectrum outside of Quebec. Canaccord Genuity analyst Aravinda Galappatthige previously noted that, after BCE Inc. purchased Manitoba Telecom Services Inc. and “theoretically” upheld the four-player wireless policy, Shaw would likely be the only buyer for Quebecor’s estimated $800 million in non-core assets in a non-competitive process that would drive down their value. Huang added that government policy is shifting away from subsidizing the fourth wireless player, especially because the fourth player in each market is well established financially, he said. “This reduces the probability that the upcoming 600 MHz auction will have any special conditions favoring” the fourth player, he said in the Friday note. This means it would make “strategic sense” for Shaw to acquire what’s left of Quebecor's non-core spectrum before the Big 3 could bid for licenses when the moratorium ends in 2019/2020. The incumbents previously said they prefer the government hold the auction in late 2019 or 2020. However, it may cost Shaw a pretty penny to convince Quebecor to sell now and forego the opportunity for a competitive bidding process, Huang added. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

Quebecor spectrum sale has ‘broad implications’: Barclays

News | June 9, 2017

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