Three weeks before deposits are due for bidders in the 700 MHz spectrum auction, the head of Wind Mobile can’t say if the startup will be participating.
“We’re continuing to assess our alternatives,” chairman and CEO Anthony Lacavera said in an interview Tuesday.
The spectrum in that band is hotly desired for its characteristics, which will allow cell phone carriers to save money by needing fewer antennas to cover an area than they use now.
But Wind’s ownership is in flux. U.S. giant carrier Verizon Communications has apparently pulled out of talks with the Canadian company’s biggest equity shareholder, Amsterdam-based VimpleCom Ltd.
Meanwhile Lacavera (pictured above) is mounting his own offer for VimpleCom’s shares. He didn’t detail his plan, but he has talked in the past about partnering with Naguib Sawiris, Wind’s original backer with Orascom Telecom Holdings. Sawiris sold Orascom to VimpleCom in 2011. Sawiris came back to Canada earlier this year buying the Allstream division of Manitoba Telecom Services.
Because he has made a proposal to VimpelCom and is therefore in a potential conflict of interest, Lacavera has stayed away from talks between it and Verizon.
In fact, he said, he couldn’t confirm media reports that Verizon has walked away from talks with VimpelCom. Those reports also said Verizon is now thinking of bidding in the auction by itself.
Deposits totaling five per cent of a participant’s opening bid – which is based on where it wants to be bidding — are due to be given to Industry Canada on Sept. 17. The rest of the down payment is due Oct. 29. The auction itself will start January 14.
There are reports Verizon made a tentative offer of around $700 million for the Canadian carrier.
Lacavera also said he isn’t sure if Verizon was serious about buying Wind and/or Mobilicity.
Big carriers don’t go in and out of negotiations prior to an auction, he suggested. He argued that carriers usually go into a foreign market by buying spectrum, not an existing operator.
“What everyone is forgetting is that VimpelCom is under no pressure to sell,” Lacavera added. “They’re very well funded and may decide to stay.”
The Canadian unit, with about 650,000 subscribers is a small part of VimpleCom’s telecom empire. It has 57 million wireless subscribers in Russia alone.
It’s Web site days the company considers its operations in Ukraine, the Commonwealth of Independent States (including Kazakhstan and countries nearby), Bangladesh, Pakistan and Algeria to be its “growth engine.”
Although spectrum in the 700 MHz band is considered essential for North American carriers these days, no one doubts that participating will be expensive for small carriers. Wind may decide to sit this one out and concentrate on expanding its network. Ottawa has said there will be another auction in 2015 of spectrum in the 2.3 MHz band.
Wind has other options, with VimpelCom’s help – buying spectrum from other carriers.
Calgary-based Shaw Communications, which, like Wind, bought spectrum in the AWS band in the 2008 auction, has frequencies in Western Canada it wants to sell. Quebec cableco Videotron has AWS frequencies covering Toronto it wants to sell.
Both struck deals with Rogers Communications Inc. giving it first option on that spectrum when the five-year ban runs out next year on new carriers who bought spectrum in 2008 selling their frequencies to incumbents.
There’s also financially-troubled Mobilicity, which made a deal to be bought by Telus Corp., a deal Ottawa has rejected because it came before the five-year ban expired.
It isn’t clear what Ottawa will do once the five year ban runs out. It has said that it will review any spectrum transfers to incumbents on a case-by-case basis looking at the competitive market, but that doesn’t mean incumbents will automatically be forbidden from getting at that spectrum.
Meanwhile Lacavera said he’s encouraged that Ottawa is “holding its ground.” Wind’s ability to possibly finance those spectrum acquisitions has improved, he argued.
The implication of Ottawa refusing the Telus-Mobilicity deal and its policy on reviewing future spectrum transfers is that “government is not going to permit incumbents to overpay (for spectrum) and keep out competitors,” he said.
Elsewhere, the House of Commons Industry committee refused an opposition demand for public hearings over the government’s wireless policy in the wake of a campaign by Rogers, Telus, BCE Inc.’s Bell Canada [TSX: BCE] and the Canadian Wireless Telecommunications Association (CWTA) complaining that its policies favor foreign companies like Verizon.
“It’s unfortunate that the government has rejected the chance to engage with Canadians on the public stage and show leadership in this critical national debate,” BCE chief executive officer George Cope said in a statement. “We encourage Ottawa to reflect, open up the conversation and listen to what so many voices in Canada are saying to them,” Telus [TSX: T] CEO Darren Entwistle said in a statement.
The big three say Ottawa has created three loopholes in the rules, but Industry Minister James Moore says its policies were carefully made.
