Spectrum auction opens with an outpouring of bids from newcomers

As expected, two newcomers to the cellular world led the bidding in a big way on the first day of multi-million dollar bidding for new Canadian wireless spectrum.

On Tuesday, in the first stage of what observers expect will be several weeks bidding, Calgary cableco Shaw Communications bid $153 million for licences in the first round, which ended yesterday, and another $69 million in the round. The third round opened this morning and will last two hours, followed by another two-hour round this afternoon.

Toronto’s Globalive Wireless, which owns dial-around long-distance provider Yak Communications and is backed by billionaires from Egypt and Iceland, bid $135 million on licences in the first round and another $3 million in the second round. MTS-Allstream bid $65 million in the first round and $24 million in the second round.

They are among 20 newcomers bidding on spectrum set aside for Industry Canada specifically to encourage new entrants to challenge incumbents.

By the end of the two-hour bidding session Tuesday, the highest bids for the licences totalled $490.8 million. Emotions presumably settled down for the second round, for the highest bids totalled only $69.3 million, meaning at the end of the day the total high bids were just shy of $560.2 million.

Round 3 on Wednesday morning added another $67.4 million, pushing the total number of high bids on all of the available licences to $627.6 million. The biggest bidders at the end of this round were Quebec cabelco Videotron ($276 million), Telus ($193 million), Rogers Communications ($173 million ), the so-called “Novacap” consortium [see below] ($130 million) and Data & Audio-Visual Enterprises ($127 million), which is a group that includes Toronto’s John Bitove and Microsoft co-founder Paul Allen.

Looking back to the opening day, among incumbent operators Telus bid almost $60 million in Tuesday’s first round and $48.5 million in the second, Bell Mobility bid $75 million in the first round and $42 million in the second, while Rogers Communications bid $18 million and $11 million in the first and second round respectively.

Also active among the newcomers was a numbered consortium which had been headed until recently by Montreal investment firm Novacap and has veteran wireless venture capital firms from the U.S. behind it. This group now promises that when the bidding is over its lead Canadians will be Rho Canada Ventures, BMO Capital and Cyntech Holdings Ltd. It bid $65 million in the first round and $24.9 million in the second. A U.S. spokesman for one of the U.S. vencaps in the Novacap group and the head of Globalive have said they each are aiming at creating national wireless carriers.

Other eligible auction bidders may be aiming for regional or local franchises, but could ally after the auction with others to create a national network.

The auction, which runs weekdays from 9 a.m. to 5 p.m. Eastern time, is being conducted in three stages, with multiple rounds in each stage. Industry Canada is trying to increase the pressure with its rules, so for the first two days of Stage 1 there were two rounds of two hours each, while Thursday and Friday there will be four one-hour rounds.

Each licence across the country has a set of points determined by Industry Canada. Before the auction started each participant “bought” a total of points that it has to use in the auction. In each round the licences they bid on have to total at least that many points.

To help things along, the bidding increments are set by government rules and can be seen online, so participants know how much the next minimum bid will be. For example, when bidding resumed this morning the high bid for the 20Mhz licence for Montreal was $24.8 million. The next bid had to be at least $28.6 million. The high bid for the 20Mhz licence for Toronto at the end of yesterday was $36.9 million, and the next bid had to be at least $42.5 million.

For background on the bidders and the auction process, click here.

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including ITBusiness.ca and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@] soloreporter.com

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