Rogers Communications is trying to ensure that a competitor won’t get its hands on the largely Western Canadian wireless spectrum owned by cableco Shaw Communications.
Shaw said Monday that as part of a $700 million deal, Rogers has been given an option to buy the spectrum Shaw bought in 2008 covering B.C., Alberta, Saskatchewan, Manitoba and parts of Northern Ontario.
The biggest part of the deal is the $400 million sale of Shaw’s cable operations in the Hamilton, Ont. area.
But if Rogers is able to get hold of the spectrum – which Shaw paid $190 million for – it will fatten its spectrum holdings in the West against competitors Bell Mobility, Telus Corp., Wind Mobile and Mobilicity.
The more spectrum a carrier has the more customers it can comfortably carry on its network.
Industry Canada rules forbid new entrants like Shaw from selling their spectrum to an incumbent carrier for five years, which would be the spring of 2014. The rule was put in to ensure incumbents wouldn’t buy out fledgling wireless companies.
Although it isn’t specified in the statement put out by Shaw, according to news reports the option Rogers has bought can only be exercised in 2014.
The Hamilton cable deal has to be approved by the Canadian Radio-television and Telecommunications Commission (CRTC).
The deal confirms that Shaw has turned its back on cellular after buying spectrum in what most industry analysts believed was a strategy to offer so-called quad-play services to customers — that is, cable TV, Internet access, VoIP home phone and cellular. That’s the strategy of Rogers, and it has been followed by Quebecor Inc.’s Videotron, which also bought spectrum in 2008.
Bell and Telus also offer TV (over the Internet), Internet access, VoIP and cellular
But after an initial attempt to build a network, looking at the $1 billion Quebecor spent to build its network across Quebec and the money spent by Wind and Mobilicity, Shaw decided in 2011 its wireless play will be Wi-Fi. Since then it has begun building a network in the largest Western Canadian cities.
The deal, which solidifies Rogers’ grip on Ontario, comes months ahead of an auction for spectrum in the highly-desirable 700 MHz band.
The spectrum Shaw bought is in the higher AWS frequencies, which is good enough for Rogers, Bell and Telus to be deploying their next-generation LTE networks.
Startups Wind and Mobilicity, as new entrants, had no impediments to buying the Shaw spectrum. It would have made sense for both, if the price was right, and lowered their need to get into expensive bidding for 700 MHz spectrum.
In a news release Shaw [TSX: SJR.B] CEO Brad Shaw said overall deal with Rogers “is strategic for both parties.”
“The majority of the proceeds will be reinvested back into our business and will be focused on improving and strengthening our network advantage,: he said. “Key strategic investments that will be accelerated include the completion of our Calgary data centre [which was damaged in a fire last year], further digitization of our network, additional bandwidth upgrades, expansion of our Wi-Fi network in Western Canada and additional product development relating to Shaw Go and other applications that are focused on an enhanced customer experience.”