Rogers Communications Inc. officially announced on Monday its intention to acquire Microcell Telecommunications Inc. — the smallest of Canada’s cellphone companies.
In a statement released Thursday, Rogers said it has had “discussions” with Microcell and had entered into a confidentiality agreement with the company while performing certain “due diligence.”
Rumours of a possible acquisition by one of the market’s larger players is nothing new to Microcell, which is already facing a hostile $1.1 billion takeover bid from market giant Telus Corp which hinges on a Competition Bureau ruling.
Telus’ bid is more of an issue to the Competition Bureau than Rogers would be because it is seen as the “big bad monopoly” from the West, explained Brian Sharwood, a principal at analytics firm Seaboard Group in Toronto. For the same reason, Bell Mobility will probably stay out of the fray when it comes to acquiring Microcell.
“Bell is basically trying to convince the market that the world is very competitive…the regulatory folks at Bell say, ‘we are not the bad guy, it’s a very competitive market, we have to compete for every customer we get.’ [If they then] bought the smallest one out, you are not sending the right signals to the competition bureau and the CRTC,” Sharwood explained.
If Rogers does obtain approval from the Competition Bureau to go ahead and purchase Microcell, this would make the company the biggest wireless provider in Canada, which Sharwood says wouldn’t “make the people at Bell too happy.”
Buying Microcell would give Rogers the ability to refocus its brand towards a different crowd, Sharwood explained, including businesses, families and more security-oriented users. Microcell’s Fido brand would continue to attract the teenage market.
Also beneficial to Rogers, Sharwood noted, would be Microcell’s spectrum capacity. Rogers currently runs close to the line in terms of capacity, while Fido has been bumping up its share in urban areas, including Montreal and Toronto, over the last several months under its City Fido platform.
Although Sharwood doesn’t think Bell Mobility will be jumping on the Microcell bandwagon any time soon, there is one company that would make the purchase possibilities interesting.
U.K. based Virgin Mobile is about to move into the Canadian market and “cause trouble” according to Sharwood. It is going to bring with it a large marketing budget and a plan to spend a lot of it going after a young, hip market, some of which Fido already has.
“It’s a quick way of picking up a million or so subscribers half of which are pre-paid which is what [Virgin] wants.”