Source : Globe & Mail

Federal auction nets $4.25-billion

Canadians can expect to see lower prices and more services for their cellphones beginning next year, as the result of a blow-out sale by Ottawa of new wireless spectrum licences that will add billions of dollars more to the government coffers than anticipated.

The auction, which concluded yesterday after nearly eight weeks of frantic bidding worth $4.25-billion, means Rogers Communications Inc., Bell Mobility Inc. and Telus Corp. will be combatting new entrants vying for the profits of one of the most lucrative wireless markets in the world. And consumers will see fresh choices from regional cable operators, new players setting up in major cities and possibly one new national phone company.

The incumbents say it will be "business as usual," insisting the new arrivals won't be able to match their quality and reliability of service. But the new competitors are vowing to change the rules of the game by building smarter businesses, reducing prices and making billing simpler for customers to understand.

"The wireless industry in Canada will never be the same," said Anthony Lacavera, chief executive officer of Globalive Communications Corp. "We have acquired sufficient spectrum to build a new national wireless carrier."

His company, which sells Yak long-distance services to about one million Canadian households, has committed $442.1-million for licences in all provinces except Quebec, where Quebecor Inc.'s Vidéotron Télécom Ltée paid dearly to keep out other newcomers.

Mr. Lacavera joins other critics of Canada's telecom industry, saying consumers pay too much and are waiting too long to receive features already commonplace in other parts of the world, such as mobile broadband. The willingness of companies to bid so much for the spectrum indicates just how lucrative the Canadian market has become for the big three cellphone companies, say the critics and analysts.

Globalive has some powerful partners in its quest to build a new national wireless network, including Weather Investments, controlled by Egyptian billionaire Naguib Sawiris. Mr. Sawiris rules a wireless empire with more than 90 million clients in the Middle East, Africa, Asia and Europe.

Mr. Lacavera said he and his team will tap this experience to go after "all Canadians" with a new phone service that offers simple and clear billing and rich new features.

Canadians should expect to see inexpensive cellphone plans just over a year from now, according to John Bitove, the man perhaps best known for launching the XM Canada satellite radio service and for bringing the Toronto Raptors basketball franchise to Canada.

His firm Data & Audio-Visual Enterprises Wireless Inc. is spending $243.2-million on licences in 10 of the 13 largest cities in the country. DAVE will target the 38 per cent of Canadians who don't already own a cellphone. "Sometimes lifestyle decisions are made because of price," he said.

Similar to Globalive, DAVE has money and experience on its side. The venture includes Microsoft Corp.'s co-founder Paul Allen and Quadrangle Group LLC, a private investment firm with more than $6-billion in assets under management.

Mr. Bitove is also executive chairman of Priszm Income Fund, which owns hundreds of KFC, Taco Bell and Pizza Hut outlets across the country.

Industry Canada began the auction May 27, saying it sought to "achieve lower prices, better service and more choice for consumers and business."

The government's haul from the auction is about three times initial expectations. The three incumbents account for almost two-thirds of the total, as they grabbed almost all of the spectrum on the block that was open to all bidders. Another dozen bidders spent about $1.63-billion on spectrum specifically set aside for new entrants.

During the auction, bidders were discouraged from discussing their plans publicly so as not to influence the outcome of the bidding.

Yesterday, the incumbent phone companies reacted coolly to some of the talk from the new entrants.

"We just don't see anything new coming along," said Robert Bruce, president of Rogers Wireless Inc. Much of what is offered will amount to "discount services," and Rogers will continue to be the leader in innovation and quality, he said.

Rogers was the top bidder in the auction, committing $999.4-million for new licences. Mr. Bruce said the new spectrum will allow it to keep adding to its network capacity so it is able to deliver the next wave of wireless services. The auction, he said, was propelled by the "mythology of pricing."

Bell Mobility is spending $740.9-million and Telus has committed $879.9-million.

"We've hit the areas we needed to be in. We've pretty much got the country covered," said Mirko Bibic, senior vice-president of regulatory affairs for Bell Canada.The high level of the bidding shows the new entrants were well funded and able to pay for the spectrum they won, he said, adding that the government should not have given favourable treatment by setting aside spectrum exclusively for new players.

Among the new entrants, Vidéotron was extremely aggressive in grabbing licences inside Quebec, bidding $554.5-million to make sure no new player was able to enter its backyard.

Calgary's Shaw Communications Inc. and Atlantic Canada's Bragg Communications Inc. have also obtained enough spectrum to build wireless networks in their home regions.

Industry Minister Jim Prentice said the results of the auction exceeded all expectations. "We think consumers will be the big winners in this auction," he said in a news release.

The government will award the licences in another few weeks, after it has reviewed the ownership and control structure of the bidders to make sure they each meet rules limiting foreign involvement.

The last time new entrants won spectrum licences for Canada's wireless market was in 1995. Clearnet and Microcell both launched services in 1997, and both were eventually purchased by a current incumbent. Telus paid $6.6-billion for Clearnet and Rogers bought Microcell for $1.4-billion. Clearnet's former president, George Cope, was named president and CEO of Bell Canada parent BCE Inc. this month.

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Key auction facts

The Canadian government announced yesterday that its auction of the airwaves had concluded.

The bidding raised $4.25-billion in standing high bids - more than double what analysts expected.

Rogers Communications Inc. , Telus and BCE were the top three bidders. Rogers alone offered nearly $1-billion.

Bidding began on May 27.

105 megahertz of radio frequency spectrum was to be auctioned.

40 MHz of the spectrum to be auctioned was set aside for bids by new entrants. The government said the "set-aside" was intended to stimulate competition in Canada's wireless market.

Rogers, Telus and BCE now control about 95 per cent of the wireless market in terms of revenue.

Notable newcomers include Quebecor Inc., Globalive Communications, Shaw Communications Inc. and Data & Audio-Visual Enterprises Wireless.

No U.S. carriers participated in the auction.

The last major wireless auction in 2001 yielded $1.5-billion for the government.

Source: Reuters

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