TORONTO – The pending AWS-3 auction announced Monday could spark the consolidation of some new wireless entrants, and give Quebecor/Videotron the push it needs to launch a national wireless service, say industry analysts.
“We believe that (Industry Canada’s) move is the first of many important requirements that will lead to the consolidation of fragmented new entrants and spectrum licences, and attract new capital from Quebecor/Videotron and potential partners”, wrote Scotia Capital’s Jeff Fan in a note to clients.
Videotron’s other requirements, Fan continued, are lower wholesale domestic roaming rates to at least below $0.01/MB, better rules to ensure tower sharing, a fresh capital injection of approximately $1.3 billion, an agreement with Wind Mobile and Mobilicity stakeholders to consolidate the two into a combined entity, and consolidation of Shaw’s spectrum licences in Alberta and B.C.
But Dvai Ghose, Managing Director/Head of Research at Canaccord Genuity, wonders if the spectrum set aside for new operating entrants would really make much of a difference to their future success, though acknowledged that new entrant consolidation “could help”.
He also seemed bearish on Videotron’s chances as Canada’s fourth national wireless company.
“We believe that 1) Canada cannot support a 4th national wireless carrier, which is why new entrants have generally failed; 2) Videotron’s balance sheet is small and weak; 3) Videotron is unlikely to do well with wireless outside Quebec, even with further regulatory support (its wireless position in Quebec has been less than stellar despite huge advantages in Quebec); and, 4) while Videotron is looking for (joint venture) partners, (joint ventures) in the sector have generally failed”, he wrote in a client note.
But Fan believes that Videotron will expand nationally, provided it can structure a transaction that limits the risk to parent Quebecor Inc. and preserves the flexibility to buy back the 25% stake of Quebecor Media held by CDP Capital d’Amérique Investissements Inc. (a subsidiary of Caisse de dépôt et placement du Québec, the provincial pension fund).
– Lesley Hunter
