Anthony Lacavera has been eyeing the wireless market for 10 years, since he got into the telecommunications market with a company providing services to new competitive local exchange carriers.
On May 27 he’ll start finding out if he’s a visionary or has been blinded by ambition. That’s when Lacavera and 26 other bidders will begin an auction for cellular spectrum reserved for new providers.
Over the next week, IT World Canada will profile some of the new faces gunning for a slice of the wireless market in Canada.
Those so-called newcomers aren’t exactly telecommunications rookies. Those with national aspirations include giant cable companies Shaw Communications (which sells Internet services and VoIP) and Videotron (which resells cellular spectrum from Rogers Communications); a syndicate led by wealthy Toronto satellite radio franchise owner and ex-sports mogul John Bitove that includes billionaire Microsoft co-founder Paul Allen; and a Quebec private equity company whose American VC partners specialize in setting up mobile wireless firms.
Along with them are small companies that will bid only for local or regional spectrum.
It’s a process that could take a while – the recent U.S. 700MHz auction, admittedly in a bigger market, took 38 business days over three months.
We wanted to give Network World Canada a brief look at many of the bidders and their goals. However, some, like Bitove and Edmonton’s wealthy Ghermezian family, refused to be interviewed or, if they did, would say little. Few would say whether if they win spectrum they will be GSM or CDMA providers because that will be part of their business strategies.
GLOBALIVE COMMUNICATIONS
Lacavera, president of Globalive, is among those who can’t hold back their enthusiasm.
“I’m pretty excited about the potential,” he said. And why not, with partners like Weather Investments, headed by Egyptian wireless tycoon Naguib Sawiris, whose firm runs providers in his home country and Italy, and Novator EHF, the investment arm of billionaire Thor Bjorgolfsson, which owns 3G carriers in Iceland and Poland.
With their help Lacavera has been able to give Industry Canada a $235-million deposit towards the auction, enabling him to compete against Shaw ($400 million), MTS Allstream ($340 million), Videotron’s parent Quebecor ($317), and significantly ahead of the Bitove group’s $106 million. Globalive was created in 1998 to sell teleconferencing, directory and operator services to CLECs. But incumbent carriers had the bank accounts to fend off CLECs, so Globalive turned to selling telecom services to hotels.
Then in 2006 Lacavera bought Yak Communications, a dial-around long-distance provider and expanded his offerings in that area. Yak, which now also offers high-speed Internet access and VoIP in some provinces, he believes, will be his lever into wireless.
The partnership with Weather and Novator was sealed with a handshake after a whirlwind six-day courtship, by his account. A mutual friend introduced him to a Canadian who had worked for Sawiris to provide an introduction to Weather, while Novator, which was looking for an entre to the Canadian market, called Lacavera. Lacavera has nothing but admiration for Sawiris and Bjorgolfsson, whom he hadn’t met before, calling them “tremendously successful entrepreneurs.” Exact details how much each partner will own in the wireless division will be revealed May 14.
Lacavera is coy about his business strategy, although Yak’s Web site says it will be a no-contract offering for consumers. But he’s outspoken on the need to give Rogers, Bell and Telus a run for their wireless money.
How does the auction work?
“Canada lags substantially in choice, features functionality and price,” he said. In particular, he’s critical of the low-speed broadband providers here offer compared to the 3G services elsewhere. “Our Internet connections are a joke on cellphones,” he said. What YakMobile will offer are features such as video and social networking applications “at a price that’s more in line with Canada’s competitors.”
Assuming he gets the licences he wants, the partners could need to spend $1 billion on network infrastructure to get a national network, he estimates. But “Weather and Novator have more than enough resources,” he added, “so we’re not planning on raising any additional financing.”
His goal is to be up and running six months after the auction ends, say, in the first quarter of next year. That won’t be in every city, but if things go well a coast-to-coast service would be operational in 2011.
NOVACAP GROUP
Leading this syndicate of six companies until a week before the auction was Novacap, a Longueuil, Que., private equity firm with 66 per cent of the voting shares of a numbered company set up for the bid, with a number of U.S. venture capital firms as partners.
However, Canadian organization of the group has changed. According to documents filed with Industry Canada, when the auction is completed Novacap will be replaced by a group that will have two-thirds ownership led by BMO Capital and Rho Capital Ventures, which has offices in Montreal, New York and Palo Alto, Calif.
But arguably the most interesting members of the group are M/C Venture Partners of Boston and Columbia Capital Equity Partners of Alexandria, Virginia, who not only have great experience in setting up wireless operators in the U.S., they regularly participate in buying spectrum in auctions there for the purpose of creating companies.
These are the pros from Dover: metroPCS, a Richardson, Texas–based no-contracts provider serving eight major markets which both companies nurtured, scored US$1 billion (that’s right, billion) when it went public last spring. (For those interested in possible strategies our new entrants might spawn, note that metroPCS offers five flat-rate, unlimited time monthly plans for consumers starting at US$30 a month. Pay more and get long distance, voice mail, text messaging etc. There are also business bundles.)
OK, it’s a market 10 times ours (although metroPCS isn’t running yet in New York, New Jersey, Massachusetts or the Washington, D.C area). But the p