Quebecor adds spectrum, still non-committal on national expansion

Quebecor Inc. is still publicly sitting on the fence when it comes to expanding its wireless service throughout Canada despite bidding $187 million on 2500 MHz spectrum, including for licences outside Quebec, in an auction for which results were announced Tuesday. After Telus Corp., Quebecor was the second-biggest spender in the auction, acquiring 18 licences in Quebec, Ontario, Alberta and British Columbia. Industry Canada said the purchases increased Quebecor's spectrum holdings by 28 per cent. Quebecor CEO Pierre Dion said in press release that its actions in the 2500 MHz auction, which started April 14, were "mainly to support operations in Quebec," and an Industry Canada chart showed most of the licences it bought were in that province. Dion added: "For the spectrum we have acquired in English Canada, we are still analyzing various options that hold out prospects of very attractive returns, given the value of this strategic asset. We will continue patiently and carefully analyzing our options, it being understood that the financial and/or operating conditions will have to fall within acceptable parameters.” Quebecor said the spectrum purchased in this auction covered the whole province of Quebec, and elsewhere was mainly in major cities such as Ottawa, Toronto, Calgary, Edmonton and Vancouver. In the AWS-3 auction in March, Quebecor spent $31.8 million on spectrum but stuck to its existing base of Quebec and the Ottawa area, where it enjoyed the advantage of buying airwaves designated for "operating new entrants." It spent $233.3 million in last year's 700 MHz auction, which included buying licences in Ontario, Alberta and B.C. Quebecor officials told the CRTC at a hearing in October that a national expansion of its wireless service depended on how far the CRTC went in regulating wholesale access to other carriers' networks. The CRTC said earlier this month it would regulate fees BCE Inc., Rogers Communications Inc. and Telus charge smaller Canadian carriers for roaming access based on the incumbents' costs. The CRTC, however, shied away from imposing new rules on tower sharing. Phillip Huang, telecom analyst with Barclays Capital, said in a research note Tuesday that Quebecor's activity in the 2500 MHz auction is "a clear sign of the company's conviction" in the opportunity that exists for a fourth national wireless carrier. Wind Mobile was an approved bidder in the 2500 MHz auction but did not win any licences. It spent $56.4 million on spectrum in Ontario, Alberta and B.C. in the AWS-3 auction two months ago. Wind officials did not immediately return requests for comment on Tuesday. There has been speculation that some kind of arrangement between Quebecor and Wind could occur to facilitate the emergence of a fourth major national wireless operator. Huang said that Quebecor's purchases of 2500 MHz spectrum gives it more "bargaining chips to negotiate a partnership with Wind in the future, in our view." He said Wind's lack of activity "reflects the relative priorities/financial constraints of its financial backers." Scotia Capital analyst Jeff Fan said in a research note the results suggest Wind might have been outbid by Quebecor in areas such as Toronto, Vancouver, Calgary and Edmonton. For the second-straight time in a wireless spectrum auction, Telus was the biggest spender. Telus obtained 122 licences for $478.8 million, gaining spectrum in every province and territory. Its purchases made up most of the $755.4 million Industry Canada raised in this auction. Telus chief financial officer John Gossling said in January at a CIBC investor conference in Whistler, B.C., that the 2500 MHz auction would help the company catch up to Bell and Rogers in spectrum holdings. He noted that these two competitors faced limits in the auction because of how much 2500 MHz spectrum they already held. On Tuesday, Industry Canada said Telus raised its spectrum holdings by 37 per cent in this latest auction. In the AWS-3 auction this year, Telus was also the biggest spender, bidding $1.51 billion out of an auction total of $2.11 billion. It spent $1.14 billion in last year's 700 MHz auction, second only to Rogers, which spent $3.29 billion in am auction that raised $5.27 billion. "Spectrum is the oxygen of a wireless network, the one element that allows Canadians to have an immersive experience while on the move," Eros Spadotto, Telus' executive vice-president of technology strategy, said in a press release Tuesday. "Telus has invested significantly over the last several auctions to ensure our 8.3 million wireless customers will continue to have access to outstanding speed, reach and capacity as demand for wireless services continues to increase." Telus said the 2500 MHz spectrum it picked up is already compatible with several leading smartphones, so it can be deployed quickly. It added that this spectrum is "ideal for carrying large amounts of data, making it especially valuable in urban centres, and will complement Telus' existing low-band spectrum, which is better able to penetrate buildings and elevators and also travels farther in rural areas." Gregory Taylor, principal investigator at Canadian Spectrum Policy Research, said in a phone interview that he agreed with Telus' assessment of 2500 MHz, saying that it does perform well with data-intensive communications, though more towers are required because it does not travel as far as other spectrum, such as 700 MHz. Industry Canada said in a press release Tuesday that 2500 MHz spectrum is "ideal for providing broadband services in rural areas, and it can also deliver fast, reliable service on the latest smartphones and tablets." Xplornet Communications Inc., which calls itself Canada's leading rural Internet provider, bid $24.4 million for 42 licences in every province except Saskatchewan, and it did not buy spectrum in the North. Industry Canada said Xplornet's spectrum assets increased by 62 per cent as a result of the auction, the biggest proportional gain among the nine companies that won licences. "It's a great day for broadband in rural Canada," Xplornet president Allison Lenehan said in a press release Tuesday. Xplornet said the new spectrum will support LTE-based fixed wireless Internet in rural areas, helping to provide download speeds as fast as 25 Mbps. "While spectrum is often considered for mobile phone use, it's also essential for helping us deliver wireless high-speed Internet to homes and businesses," Lenehan added. "This auction was successful in making spectrum accessible to rural Internet services and sets a precedent for how auctions can allow mobile and fixed services equal opportunity to participate and develop services for the benefit of all Canadians." When the government announced plans for the 2500 MHz auction in early 2014, it said smaller licence regions would provide more opportunity for independent ISPs that serve rural areas to acquire spectrum. Chris Johnston, executive vice-president of marketing for Xplornet, said in a phone interview that the company is currently providing LTE-based fixed Internet service in New Brunswick, and it is in development in Ontario and Alberta. He said the latest spectrum purchase makes it possible for this kind of service to be offered by Xplornet in most provinces. "What this spectrum will do is give us a position to create a footprint that will allow us to address a significant number of un-cabled households in rural Canada," Johnston said. Industry Canada said, with these latest auction results, the amount of spectrum in Canada available for mobile services has grown by 60 per cent since early 2014, which is the fastest growth ever in that amount of time. Another auction has been scheduled for August for unsold portions of 700 MHz and AWS-3 spectrum. The 2500 MHz auction saw Bell bid $30 million to secure 51 licences in every province and territory except Saskatchewan. Bell said in a press release that this spectrum will help it further deploy LTE service. It said it currently has 91 per cent of Canada's population covered by LTE and expects to increase that to 98 per cent by the end of this year. Rogers won 41 licences for $24.1 million, gaining spectrum in every province but Quebec, and not in the northern territories. Other winners of 2500 MHz spectrum included Manitoba Telecom Services Inc., which spent $2.2 million for two licences in its home province. Eastlink secured 11 licences in all the Atlantic provinces, plus Ontario and Alberta, for $4.8 million. TBayTel Inc. bid $1.7 million for two licences in northern Ontario. Corridor Communications Inc. obtained 13 licences for $2.3 million in Ontario and Alberta. SSi Micro Ltd. was the only other company besides Wind Mobile that was registered to bid but walked away empty-handed. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Quebecor adds spectrum, still non-committal on national expansion

News | May 12, 2015

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