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    New national cell carrier unlikely from auction  
    Toronto Star  

Chris Sorensen

    May 28 , 2008  

Ottawa has rung the opening bell on an auction of wireless airwaves designed to lower cellphone bills for Canadians, but observers are split on whether the effort will significantly alter the competitive landscape of the industry over the long term.

The federal government's latest spectrum auction began yesterday and is expected to last several weeks, with more than 20 approved participants bidding on the available airwaves over several rounds.

Of the 105 megahertz up for grabs, 40 has been set aside for new entrants in a bid to encourage more competition in a wireless sector that is dominated by Rogers Communications Inc., Bell Canada Inc. and Telus Corp.

Industry Minister Jim Prentice reaffirmed in a statement yesterday that the government's intention was to "achieve lower prices, better service and more choice for consumers and business." But some observers said the biggest changes now seem likely to occur on a regional scale.

"It's unlikely that we're going to see a nationwide new carrier," said Mark Tauschek, an analyst at Info-Tech Research Group. "And that's because the best chance, the MTS Allstream conglomerate, fell apart last week."

Though it's still in the auction, Manitoba Telecom Services Inc. said last week that its financial partners, Canada Pension Plan Investment Board and Blackstone Capital Partners, had dropped out.

While another potential candidate announced last week that it too was dropping out, citing foreign ownership restriction and a lack of Canadian investors, a spokesperson for U.S.-based M/C Venture said yesterday the group had reversed its decision and is once again bidding.

"I can confirm they're now staying in after all," said a spokesperson without providing further details.

Industry Canada stressed from the outset that it did not have preference for the auction's ultimate outcome.

It set aside enough wireless spectrum to allow for the creation of a fourth national wireless carrier or several regional players.

Info-Tech's Tauschek said he expects such established companies as Quebec's Vidéotron Ltée and AlShaw Communications Inc. to seek licences in regions where they offer other services.It's also possible that some of the bidders, possibly Globalive Communications Corp. or MTS, could end up with enough spectrum to launch a wireless service in selected Canadian cities, similar to the way Microcell's Fido brand operated before it ran out of money and was purchased by Rogers in 2004, Tauschek said.

But others say it may be too soon to rule out the possibility of a new national provider.

Iain Grant, the managing director of consulting firm The SeaBoard Group, said that while Industry Canada rules prohibit co-operation between bidders, there could nevertheless be considerable room for deal making once the auction is over.

"The real key to prevailing against the incumbents, given their strengths, is some sort of rebel alliance," said Grant.

In a report released yesterday, SeaBoard said it still expects MTS and Vidéotron to bid on licences across the country while Shaw is expected to focus on Western Canada.

SeaBoard also predicted that Globalive will try to "pick off" cities where its Yak long distance service is popular, such as Toronto and Vancouver.

An alliance between two or more of the carriers could help spread the cost of building a national network and withstand fierce competition from Rogers, Bell and Telus, according to Grant.

He said MTS would make an ideal partner in any national effort given its fibre-optic network, which he said would be necessary in any coast-to-coast cellular service.


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