Outsourcing deals with some of the biggest names in telecommunications will make the newly-branded Mobilicity the lowest cost wireless startup operator in the country, says its president.
“If it’s outsourceable, we’ve done it.” David Dobbin, said Tuesday as he and company chairman John Bitove revealed the new go-to-market name of his firm, until now known by its Toronto parent’s moniker, Data & Audio-Visual Enterprises (DAVE) Wireless.
Mobilicity has contracted with Ericsson LM to build the network, which the carrier will own, but the equipment maker will manage it. Amdocs Ltd., one of the largest telecom operational support software companies in the world, has been hired to provide and run the operational billing and customer support system as a managed service. And MTS Allstream provides connectivity to the public phone system and co-location switch facilities.
“We believe our greatest weapon in the competitive battle that is coming is a business plan that always leaves us room to move,” Dobbin said.
Mobilicity hasn’t got its carrier licence yet, but hopes to start service in Toronto sometime this spring, then spread to Vancouver, Edmonton, Calgary and Ottawa. Later, coverage will be extended to smaller cities such as Victoria, Red Deer, Alta., Windsor, Ont. and Niagara Falls, Ont.
And while the company has spectrum covering 10 of the country’s biggest cities, Dobbin said that unlike Wind Mobile he won’t be building a national network, or going after heavy data users who travel a lot.
Instead Mobilicity will target people who “live, work and play” within the carrier’s coverage area, who want better value from their wireless subscriptions. Subscribers will be able to call other company subscribers across the country for free – like Wind – and roam outside its base coverage areas.
Subscribers will pay full price for phones from Research In Motion, Nokia and Sony-Ericsson, and there will be no-contract plans with unlimited messaging and data.
But, he said, “we’re not targeting business at all.” Instead, he said, the company will go after unnamed specific market segments.
Mobilicity has its wireless licences after paying just over $243 million to Industry Canada after 2008’s AWS spectrum auction. However, before going into business it has to get a carrier licence from the Canadian Radio-television and Telecommunications Commission (CRTC), which has to review its foreign ownership. So far, it hasn’t started.
To get an idea of how long that could take, in December the commission decided the structure of startup Public Mobile was simple enough to hold a closed-door review. Some six weeks later still isn’t finished.
The commission can hold public hearings or a closed-door review of a carrier’s ownership depending on the complexity of the structure. In the fall it held a hearing into Globalive Wireless Management Corp.’s structure because of the heavy involvement of Egyptian-based Orascom Telecom Holdings S.A.E. Combining voting and non-voting shares, Orascom has over 60 per cent of the company’s equity, and all of its debt. That was enough for the CRTC to say Globalive Wireless is a foreign controlled company. But in December it was over-ruled by the Harper cabinet. Globalive then opened its doors under the Wind Mobile brand.
The major investors in Mobilicity are John Bitove’s Obelysk Inc. and New York private investment firm Quadrangle Group.
But in an interview Bitove refused to divulge the shareholders’ equity, only that he is the controlling shareholder. Nor would he say what per cent Quadrangle owns.
Since winning its spectrum, Mobilicity has raised about $500 million, he said, enough to fund the company to breakeven. Of that, $243 million paid for the licences. The rest covers the cost of the network, operating costs and marketing.
Asked when he expects the wireless company to be profitable, Bitove said it’s funded for the next five years, “and we expect to break even within that time frame. Hopefully a lot sooner.”
While industry observers believe the cabinet’s decision, which it declared is not a legal precedent, made a mess of the country’s telecommunications foreign ownership limits, Bitove disagreed.
“The government of the day is pro-consumer and foreign ownership is in their minds a second priority to giving Canadians as much choice and competition as they can. That’s their decision. It didn’t impact us either way.”
Dobbin isn’t bothered that Wind Mobile has a jump of several months on Mobilicity’s debut. Wind prepares the market for the idea that new entrants are coming, he said. “It’s not about being first mover,” he added, “it’s about being best mover.”
Earlier, in speaking to the Toronto Board of Trade, Dobbin said there’s lots of room for more wireless carriers in this country. In the U.S., about 90 per cent of the populace has a cellphone, compared to 70 per cent here. If that penetration rate rises 20 per cent, that’s 6 million people, Dobbin said – about the same number of subscribers as Bell Mobility.
Some 10 million cellphone users a year can be poached, he added –about 6 million whose contracts end, plus about 4 million prepaid users who are available anytime.
Another possible market is getting people to give up their landlines for cellphones. Wireless substitution in the U.S. is 20 per cent, compared to 8 per cent here, he said. If all the new entrants do is raise that over five years to the U.S. rate, that’s 2 million households.
To telecom industry analyst Iain Grant of
the SeaBoard Group, who was in the audience, this way of looking at the opportunities for new entrants isn’t new. “Given that their cost structures are different from the incumbents, I don’t see there’s a problem having six or seven (wireless) carriers in the country in two or three years."
In addition to Wind, new entrants that will hit the market this year include Mobilicity, Toronto-based Public Mobile, which will offer service in the Toronto and Montreal areas, and Quebecor Inc.'s Videotron cable division, which already resells wireless but will now have its own network. Calgary's Shaw Communications and Halifax's Bragg Group are in the initial stages of planning networks and may launch next year.
But five years from now, when the incumbent carriers are allowed to buy the new entrants, he said there might be fewer.
Dobbin might have summed up the challenge of all of the new entrants when he said: “The name of the game is to get the largest number of customers possible over the smallest number of cell sites possible, thereby giving a return on equity that’s as high as possible.”