Péladeau’s move into political spotlight casts doubt on Ottawa’s wireless ambitions by Christine Dobby
Mar 10, 2014
Source: Calgary Herald
With Quebecor Inc.’s national wireless expansion already questionable, Pierre Karl Péladeau’s surprise political announcement over the weekend could cast even more doubt on Ottawa’s enthusiastic declaration that it has succeeded in delivering competition in the sector.
Mr. Péladeau, the billionaire who controls 28% of the shares and 73% of the voting shares of the Montreal-based media and telecommunications company, revealed his plans Sunday to stand for provincial office under the separatist Parti Québécois banner.
Lest his intentions remain unclear, his goal is to help eventually make Quebec a country, he stated in remarks during a campaign meeting in the city of Saint-Jerome, the district he will run in for member of Quebec’s National Assembly in the election on April 7.
Quebecor’s wireless business Videotron won licences for blocks of cellular airwaves in its home province as well as southern Ontario, British Columbia and Alberta all for the sum of just $233-million in the spectrum auction that concluded last month.
Industry Minister James Moore said the fact Quebecor was looking beyond its traditional footprint in Quebec would be a “big win for Canadian consumers,” although the company has said only that the airwaves give it a “number of options.”
“They do have spectrum, but there was never any indication as to what they were going to do with this,” said Gregory Taylor, principal investigator for Canadian Spectrum Policy Research, a research team at Toronto’s Ryerson University. “Given the events of the weekend, I would think that would be even more questionable. Péladeau says he’s going to put his shares into a blind trust but I’m not sure anybody believes it’s going to be fully hands off. Of course he’s going to have influence.”
Mr. Péladeau resigned as vice-chairman of Quebecor and Chairman of Quebecor Media and TVA Group on Sunday and said he would place his investments in a blind trust if elected. But during a news conference with Quebec Premier Pauline Marois Monday, he said flatly he would not sell his shares of the company even if the province’s ethics commissioner instructs him to.
“The proxy who will receive the mandate to manage the trust will have clear and precise guidelines — and selling Quebecor is out of the question,” Mr. Péladeau said, noting that he wants to ensure the company’s head office remains in Quebec.
“If [Mr. Péladeau] is going to be really pushing for sovereignty, it has real implications for spectrum that [Quebecor] holds across the country,” Mr. Taylor said. “I don’t think anybody in the government thought this was coming a month ago when they were declaring the spectrum auction was a great victory.”
Financial analysts say Mr. Péladeau’s political persuasions notwithstanding, Ottawa is unlikely to change course when it comes to courting Videotron as a potential competitor in Ontario, B.C. and Alberta.
“I think the government is so desperate to have a fourth carrier and they realize that no foreigner wants to participate, so I don’t think it makes any difference on that side,” said Dvai Ghose, head of research at Canaccord Genuity.
He noted that technology constraints related to the type of airwaves Videotron won mean it probably won’t be able to build a network outside Quebec for at least two to three years — if at all.
In the meantime, Ottawa is still likely to make concessions to make the environment more conducive to new entrants, he said.
“I think generically they want to help new entrants and whether they like it or not, Videotron is their only choice.”
The government has already pledged to introduce legislation capping the wholesale rates cellular companies charge competitors to roam on each other’s networks, a factor small players say is key to their ability to compete with the national offerings of Rogers Communications Inc., Telus Corp. and BCE Inc.
“I think the government is willing to give Videotron a lot,” said Greg MacDonald, head of research at Macquarie Capital Markets Canada.
Videotron’s approach, he said, could be to “start with domestic wholesale roaming tariffs and see what else the government is prepared to ante up.”
Mr. MacDonald added he did not see any connection between Mr. Péladeau’s political ambitions and Quebecor’s plans for its wireless business.
As for the possibility that Quebec actually does separate from Canada, foreign investment rules currently permit 100% ownership of companies that control up to 10% of the telecommunications market, with organic expansion beyond that. That essentially restricts outsiders’ ownership of the Big Three, but would not block Quebecor from expanding into other provinces.
© Calgary Herald