NEW YORK – Verizon CEO Lowell McAdam told Bloomberg News on Monday that his company will not be entering the Canadian wireless marketplace after all and that it wasn’t all that interested in the first place.
He told the news organization in no uncertain terms the company is not interested in investing here and all the speculation that it might enter the Canadian market was “way overblown”. He told Bloomberg that Canada held some limited appeal for the company, but now that it announced it will pay British telco Vodafone $130 billion for that company’s 45% stake in Verizon Wireless, its interest in our market is now zero as it focuses on growth in the U.S.
While the federal government will likely do its level best to put a brave face on this, the announcement by McAdam has to sting the ruling Conservatives, who had hitched their wagon to the rumor Verizon was coming (to potentially purchase both Wind and Mobilicity) and stated repeatedly how federal wireless policies were going to deliver this white knight to supposedly save competition in Canada and cut retail prices for wireless services. Those policies included (among other things) making sure newcomers could bid on two of four available blocks of 700 MHz spectrum to be auctioned off in January, while the three big incumbents could bid on just one. With Verizon out, that concern is mitigated somewhat, assuming no other big multinational moves in.
And don’t expect Vodafone to be the next white knight, either. According to a report from Reuters, the big multinational will return the bulk of the cash and stock proceeds of the Verizon deal to shareholders, which has been taken as a sign that it does not expect to go acquiring.
If anyone is going to keep trying to build a fourth national carrier, the best bet would seem to be current Wind Canada CEO Tony Lacavera and his original backer Naguib Sawiris, whose investment firm Accelero purchased Allstream earlier this year from MTS. Wind’s majority owner VimpelCom still wants to sell the company and its 620,000 customers and Lacavera is on record repeatedly saying he wants to buy it. Where this leaves the other troubled wireless player Mobilicity is unknown. It is reportedly bleeding cash and customers and the purchase deal for the company by Telus (struck down by the federal government) valued it only for its spectrum and tax losses. Most assume Mobilicity’s financial backers will keep the company running until the five-year moratorium on the sale of set-aside spectrum it bought at auction in 2008 expires.
But even then, who will be a buyer? The federal government maintains its wireless policies are sound and part of that has also been to intimate strongly that it would not allow one of Rogers, Telus or Bell to purchase that AWS spectrum even after the moratorium ends next year. That would seem to complicate a rumoured Rogers-financed purchase of Wind and Mobilicity by investment group Birch Hill Partners.
Will another international wireless firm look to enter Canada? Unlikely. As we noted back in April, many months and dozens of Verizon speculation stories ago, no regulatory "fix" was available and our wireless business is about all it’s going to be, due to the aggression of the big three, mistakes made by the 2008 newcomers and botched federal government policy. As many noted early in the Verizon rumour spree, it was always very unlikely the company would come to Canada.
Said Canaccord Genuity telecom analyst Dvai Ghose in a note to clients late Monday: “The Government may have to reduce the auction to three prime blocks in Ontario and Western Canada due to lack of bidders. The auction now looks benign for national and regional incumbents, Quebecor and EastLink. This is a very positive development for Canadian wireless carriers.”
All that said, the proof will be in the pudding, when September 17th comes and it’s time to make an initial deposit on the 700 MHz wireless spectrum auction. Of course, participants are not allowed to talk about it at all at that point, but Industry Canada is supposed to make the list of those qualified bidders public on November 8th, after final deposits come in October 29th. Even then, the auction rules say anyone can pull out and get their deposit back prior to the beginning of the auction, January 14th.
– Greg O’Brien
