MTS dissolves spectrum bid partnership

MTS Allstream has dissolved the consortium it created in March of this year to bid for spectrum in the fast-approaching Advanced Wireless Spectrum auction, saying it couldn’t come to terms with partners the Canadian Pension Plan Investment Board and Blackstone Capital partners.

“MTS, the CPPIB and Blackstone continue to believe the business case for a new entrant in Canada’s national wireless market is sound, but at the end of the day, we could not reach agreement on a handful of key issues,” said MTS CEO Pierre Blouin in a written statement. “As we’ve indicated all along, if the right deal wasn’t there for us we wouldn’t pursue it.”

The written statement was the only commentary MTS would offer, citing auction rules barring them from discussing bidding strategy. But Blouin seemed to be sounding a cautionary note for those hoping MTS would provide a national alternative to wireless incumbents Bell, Telus and Rogers, emphasizing responsibility to shareholders.

“(W)e remain committed to taking a disciplined approach (to the auction) and maintaining both our current dividend policy and a strong balance sheet,” Blouin said. “We will see what the landscape looks like after the spectrum auction and review our plans accordingly … MTS is well-positioned to continue creating shareholder value, with or without a wireless initiative.”

Network World Canada

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The size of the deposit and the number of eligibility points under the auction framework remain the same. The numbered company under which the application to bid was made, 6934242 Canada Ltd., is now under the sole control of MTS, and holds 2,643 auction points, costing a deposit of $340 million.

See how the auction works here.

SeaBoard Group principal Iain Grant says he doesn’t see MTS dropping out of the auction.

“Yes, Pierre is focussed on shareholders, (and on dividends, more to the point), but that doesn’t mean he does not have wiggle room,” Grant said in an e-mail interview.

“A national network isn’t really ‘from sea to sea to shining sea’ (as) it sounds. It is 15 cities/metros and a few connect-the-dots corridors. You can concentrate your bidding and still come away OK.

“The concern isn’t I think how will he finance a $320-million spectrum buy, but, rather, how he will build out to make that investment sing.”

SeaBoard has released a pair of papers on co-operative strategies for new wireless entrants, “So, You Want to Become a Wireless Services Provider” and “Champagne Tastes, Beer Budgets.” With SeaBoard forecasting a $500-million cost for MTS to build out a national network, it’s clear that MTS can’t do it alone, Grant says.

“Why would MTSA have to build everything everywhere?” Grant says. “Wouldn’t it be in everyone’s interest to share some infrastructure and manage the heavy lifting together? Obviously, yes.”

Moreover, wireless makes sense for MTS, Grant says, It has the crucial fibre backbone, an enterprise customer base and the project management skills to roll out a new national infrastructure – as part of an operator-led consortium.

“The other new entrants should be cheering,” Grant says. “MTS could be a good friend to all of them once the dust of the auction settles.”

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