Bidding in Canada's wireless spectrum auction hits $4B - Action News
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Bidding in Canada's wireless spectrum auction hits $4B

Bidding reached $4 billion on Monday in an online auction aimed at creating more competition in Canada's cellphone market, surpassing early expectations of the amounts of money involved.

Bidding reached $4 billion on Monday in an online auction aimed at creating more competition in Canada's cellphone market, surpassing early expectations of the amounts of money involved.

Participants in Industry Canada's wireless spectrum auction have bid $4.01 billion for licensing rights for airwaves that wireless networks need to operate over.

"It's a very high-stakes game of brinkmanship because obviously each participant has some unpublicized strategy going on," said analyst Carmi Levy.

It shows the importance of the cellphone market and the belief that there's money to be made despite Canada's challenging geography and spread-out population, said Levy of Toronto's AR Communications Inc.

Analysts had originally estimated the bidding would go as high as $2 billion for the 105-megahertz band of spectrum. Some had believed it might have been winding down when bids recently reached $3.5 billion.

"I suspect more participants are willing to let this go on for more than a few weeks than originally intended to lock in their bids for what will probably be a very lucrative business for at least a decade or more," said Levy, senior vice-president of strategic consulting.

Active bidding for both old and new players

The auction means competition from other players for the three established cellphone players: Rogers Communications Inc., Telus Communications Company and BCE's Bell Mobility Inc.

The big three players were leading bidding on Monday, but they can't bid on the 40-megahertz of spectrum specifically reserved for new players in the cellphone market.

Dominant cellphone player Rogers had bid $874.6 million for 47 licences, according to Industry Canada's website. Telus, currently owner of Canada's third-largest cellphone business in terms of subscribers, had bid $790.7 million for 53 licences.

Bell Mobility, currently Canada's second-largest cellphone company in terms of subscribers, had bid $708.2 million for 48 licences.

Quebecor Inc., which owns a regional cable and phone business that has relied on Rogers to provide the network for its wireless service, had bid $582.5 million for 17 licences.

Toronto-based Globalive Wireless had bid $431.9 million for 34 licences. It owns the Yak long-distance and internet access business.

Telecommunications analyst Mark Goldberg said bidding would continue until it starts to eat into a reasonable return on investment for participants. Goldberg said the new players, who can bid on any of the spectrum, are helping drive up prices.

"Their business plans still appear to be able to support the prices," said Goldberg of Toronto-area Mark Goldberg and Associates Inc.

"It means that they must have some interesting and innovative services to offer for consumers."

He suggested that some of the money raised could be given to Canadians as tax credits to get more Canadians connected to the internet. The federal government has said the proceeds would be used to pay down the national debt.

Pricing plans could change, analysts say

Consumers could also see some innovative pricing following the auction and likely more competitive prices and choice next summer.

The introduction of Apple's iPhone by Rogers in July on the high-speed GSM network could result in changes to the price of data plans, suggested Levy.

"Canadians are looking across the border and seeing what is there in terms of availability and price and they want it and they will increasingly do business with carriers that can bring it to them sooner, if at all," he said.

Added Goldberg: "I'd say by next summer consumers are going to have more choice and more choice tends to mean more flexible price plans."

Levy said Globalive, backed by European and Egyptian telecom companies, could emerge as the country's fourth major carrier.

It's the "most optimally positioned" to have a larger national presence because it has access to capital that none of the other smaller, regional players have, he said.

UBS Investment Research said Globalive and Halifax-based Bragg Communications Inc. were two of the most active new entrants bidding in major Canadian markets.

"Globalive continued to fight for a spot in Quebec and became a high bidder in Ottawa and Windsor, Ont., while Bragg was defending its position in Atlantic Canada and became a high bidder in Barrie and London (Ont.)," UBS said in a research note.

Toronto businessman John Bitove's Data & Audio-Visual Enterprises Wireless Inc. had bid $238.2 million for 10 licences.

Shaw Communications Inc., owner of Canada's second-largest cable business after Rogers Cable, had bid $188.4 million for 23 licences.