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    Credit ills hurt wireless entrants  
    Globe and Mail  
   

Matt Hartley (with files from Grant Robertson)

 
    October 1, 2007  
   

Funds may be scarce to build networks

 

Dark days in the financial markets could translate into a golden opportunity for Telus Corp. as the telecommunications powerhouse looks to beef up its country-wide cellular offerings at the expense of its rival, Bell Canada.

Just weeks after an auction of wireless spectrum promised to bring greater competition to Canada's cellular market, the collapse of credit markets threatens to hinder industry newcomers as they attempt to build their fledgling networks.

Analysts say incumbents such as Telus and Rogers Communications Inc. stand a better chance of weathering the economic downturn than newcomers such as Globalive Communications Corp. and Data & Audio-Visual Enterprises Wireless Inc. (DAVE). Bell is the odd man out.

As long as Bell's parent, BCE Inc., is contending with the $35-billion sale of the company to a consortium led by the Ontario Teachers' Pension Plan, Bell will face difficulty in shedding assets in order to generate the cash it needs to invest in its network, analysts said. This gives Telus a chance to establish itself as the chief rival to Rogers' dominance of the wireless industry.

"I think that Bell's weakness is Telus's potential gain," said Iain Grant, managing director of SeaBoard Group, a telecom consulting group. "Telus has the ability to potentially lap Bell and become the strong No. 2 against Rogers. In a competitive world, when your competitor is hurting a little bit ... that's the time to throw them on the ropes."

In early September, rumours surfaced about a possible partnership between Bell and Telus that would see the wireless telecom giants enter into a cost-sharing alliance to upgrade their networks from their current CDMA standards to the GSM standard employed by Rogers and most other carriers around the world. But it now appears Telus might be better off going it alone.

Telus executives could not be reached for comment. A spokesman for Bell Canada declined to comment.

The latest economic turmoil is bad news for all the wireless telecom players, said Carmi Levy, senior vice-president of strategic planning for AR Communications Inc.

"The incumbents are in a better position from both a financial and a marketing perspective, simply because they aren't faced with the daunting prospect of having to build a brand as well as introducing new services. ... Newcomers have to start from scratch, and so their relative investment is much higher."

Established firms with existing revenue streams, such as Shaw Communications Inc. and Quebecor Inc.'s Vidéotron Télécom Ltée, should be able to use their cash flow to fund investment in their wireless networks, Mr. Levy said.

Still, last week, Quebecor CEO Pierre Karl Péladeau unexpectedly announced the cable company could delay the launch of its wireless network until 2010, saying the company didn't want to rush out a "half-baked" service.

Shaw Communications CEO Jim Shaw said his company can draw on other capital from its cable and phone businesses to finance a wireless build, something startups can't do.

TELUS CORP. (T-T)

Close: $38.87, up 74 cents

ROGERS (RCI.A-T)

Close: $39.60, up $3.60

 


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