TORONTO – It’s unlikely a foreign player, like a Softbank, would enter the Canadian market and “roll up” Wind, Mobilicity and Public Mobile to take on the incumbents says a Scotia Capital analyst.
“Even if they were combined, [they] do not have the same potential combined spectrum position like S/CLWR (Softbank, Clearwire). The Canadian "challengers" would have to still acquire more spectrum licenses in the “700 MHz auction in 2013 and the 2.5 GHz auction in 2014 to compete against the incumbents Rogers, Telus and BCE,” writes Jeff Fan in the October 15 edition of Scotiabank’s Daily Edge.
The comments follow the announcement that Softbank, whose assets include the third largest mobile carrier in Japan, now intends to pay $20.1 billion for a 70% stake in Sprint Nextel Corp. Sprint also owns 48% of Clearwire, but doesn't control its board. With the financial backing of Softbank, Clearwire can now accelerate its LTE build and “enrich the device ecosystem on TD-LTE on 2.5 GHz spectrum” explains Fan.
He adds that the transaction also make the 2.5 GHz spectrum auction in Canada more interesting in 2014.
“With the prospect of an improving device ecosystem on 2.5 GHz (CLWR spectrum), it would make that license more valuable. In Canada, BCE and RCI joint venture Inukshuk already owns a significant amount of 2.5 GHz spectrum across Canada (roughly 95 MHz combined). There are some being auctioned (about 85 MHz) in 2014. We expect Telus will be active in that auction (the cap is 40 MHz so Bell and RCI will not be participating). The new entrants/challengers will likely be interested as well if they have sufficient funding (and if they are still around). However, it is still not as much spectrum as what CLWR currently owns.”
In terms of stocks, he says Scotiabank’s U.S. telco preference is no longer as strong as it was at the start of 2012. “With the outperformance of VZ [Verizon Wirless] and T.N [AT&T] over BCE, T.TO and RCI in the past year, the improved outlook of Canadian wireless, and the potential for a stronger third player in the U.S., we would prefer RCI, followed by VZ and T.TO. BCE and T.N are our least preferred.”
