BMV Holdings taps former Bell Mobility head as CEO

After months of silence, Toronto company BMV Holdings has dramatically emerged to claim leadership of a consortium that won little-wanted spectrum in the recent wireless auction, hiring a former head of Bell Mobility to be its CEO and promising to launch service in Toronto and Montreal in the third quarter of 2009.

Alek Krstajic, who has worked at Bell and Rogers Cable for 12 years, will captain the as yet unnamed startup owned by BMV Holdings, a consortium of Canadian and American venture capital companies.

The target market is “value-conscious” consumers, and at least one of their offerings will be a $40 a month plan with unlimited local calling and no extra access fees, said Bruce Kirby, BMV’s director of business development.

“We’re targeting a segment of the population that’s underserved by existing incumbents, who are focused on high-end business customers who want advanced features and BlackBerrys and iPhones,” he said. There will be no business plans, he said.

However, Lawrence Surtees, a telecom analyst at IDC Canada, noted that will put BMV up against value brands from Bell (Solo), Rogers (Fido) and Telus (Kudoo) as well as new entrant Globalive Wireless.

“It’s kind of a saturated market,” he said. “Conversely, I believe strongly the greatest potential in the Canadian wireless space is in the business market. There’s substantial pent-up demand . . . Canadian businesses have been held back [from wireless] by a variety of factors like price and complicated plans. The way is sitting there for somebody who wants to really compete intensely with simple, predicable price offerings with a quality service for business. I think there’s ample opportunity for profitable growth.”

BMV stands for Boundless Mobile Ventures, but the company hasn’t chosen the brand name it will go to market under.

Its Canadian shareholders include Toronto-based Kensington Capital Partners, a private equity fund of funds manager, and Rho Canada, the Montreal wing of New York’s Rho Ventures. U.S. partners include Columbia Capital and M/C Venture Partners, who are both experienced in setting up wireless startups in their country, Rho Ventures, and communications vencaps Charles River Ventures and Ignition Partners. Kirby wouldn’t reveal the per centage of their holdings, but under Industry Canada rules Canadian companies have to have control of spectrum holders.

One question is where or whether BMV can get handsets.

Initially, industry analysts wondered at the value of the 10Mhz of PCS spectrum in the “G” block won by BMV and several other bidders believing no handset manufacturers had devices that operated in its 1.910-1.915Ghz and 1.990-1.995Ghz frequencies. At least one analyst thought it was only good for backhaul.

Certainly the values paid for the “G” block spectrum reflected that. Winning bidders paid a total of $74.7 million for the spectrum, while an equivalent block with prime AWS spectrum fetched $517.1 million. BMV paid $52 million for its four licences covering southern and eastern Ontario and Quebec.

However, in a report coincidentally released today, the SeaBoard Group said Qualcomm and Avago make chipsets that support the entire AWC and PCS spectrum, and that Nortel and Alcatel-Lucent make base stations that are G-block capable. However, SeaBoard concedes the availability of chipsets doesn’t make a handset ecosystem. It would help, the report added, if U.S. carrier Sprint Nextel would take advantage of its G-block spectrum there and roll out service.

Ironically, the troubled economy may play into the hands of G-block owners, Grant suggested. In the past year, the factories of handset makers have been full with orders. But with the slowdown, they might have unused capacity and may be willing to cut a deal for the low volumes G-block carriers want.

Kirby, who worked with Krstajic at Bell, agreed there have been a number of questions about the availability of handsets for the G-block. It’s a main reason why the spectrum was so inexpensive, he said. “There’s network equipment that supports the band without any issues at all,” he said, while Qualcomm has chipsets and other manufactures have other pieces.

But, he acknowledged, “handset manufacturers haven’t actually manufactured regular handsets for this because no one has placed any orders for them yet.”

When it was pointed out that manufacturers will put a price on such orders, Kirby replied, “we have the money to pay, and we’ve had some fairly detailed discussions around the costs, and the costs are comparable with the costs of existing handsets.”

Kirby wouldn’t detail how much BMV plans to spend on its network. In the auction it won four licences covering southern Ontario (paying $25 million for it), southern Quebec ($16.2 million), eastern Ontario ($8.4 million) and eastern Quebec ($2.6 million).

Other G-block PCS spectrum holders are Vancouver-based Novus Wireless, which won two licences covering British Columbia and Alberta, Blue Canada Wireless, whose spectrum covers Nova Scotia and Prince Edward Island, MTS Allstream, whose licence covers Manitoba, and Globalive Wireless, whose licences cover Newfoundland, Nothern Quebec, the Yukon, the North West Territories and Nunavut.

So far only three of the new entrants who won spectrum, BMV, Globalive and Quebecor have announced their plans. Globalive is expected to concentrate first on launching service with the AWS spectrum it won that covers all of the country’s major population areas except Montreal. It has said it wants to start selling phones by the third quarter of next year. Quebecor says it’s Videotron cable division will start service in 12 to 18 months.

Nothing has been heard yet of the plans of two big spectrum winners. Bragg Communications, whose spectrum largely covers the Maritimes, and Data and Audio-Visual Entertainment (DAVE), which has spectrum covering a number of large cities.

Shaw Communications, whose spectrum covers Western Canada and small parts of Ontario, has said it won’t make material investments to build its wireless network in 2009.

BMV was not in the original consortium that was certified by Industry Canada to play in this summer’s spectrum auction, and who led the group during the auction has been a mystery. Originally, the group was fronted by Montreal investment house Novacap, with ownership including M/C Ventures, Columbia and others. However, just before the auction started, a revised ownership was filed that said Novacap would leave after the aucion, to be replaced by several companies including BMO Capital, Kensington and Rho. Who acted for the group during the auction was unknown. Novacap, M/C Ventures and Rho Canada have refused until now to be interviewed.

According to Kirby, the lead Canadians during the auction were Rho Canada and Kensington. BMO Capital is not part of the BMV group.

Part of the reason for silence was strategic, said Kirby. During the auction the group didn’t want to draw attention to itself so it would keep the G-block bidding down.

Krstajic joined Bell Canada as chief marketing officer in 2003 and become Bell Mobility CEO in 2005. Then he created the Bell Vanguard division, which a press release says was responsible for creating a low-cost operating model for parent BCE Inc. Kirby worked with him at Vanguard.

If G-block PCS licence holders are able to get at least one handset manufacturer to make a phone for them, their spectrum “may prove to be the hidden gem” of this year’s auction, said Grant, and the winners “may well have done the deal of the century.”

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