Telus claims win after government decision

Telus Corp. says a recent federal government decision concerning wireless spectrum makes it easier for the company to acquire mobile phone service provider Microcell Telecommunications Inc. But one industry observer points out that the feds’ move could hurt — just as much as help — Telus with its purchase.

The Burnaby, B.C. telecommunications service provider on Monday commented on Industry Canada’s decision to eliminate the 55MHz spectrum cap.

Introduced in 1995, the cap meant companies like Telus, which operates the Telus Mobility wireless service, could own no more than 55MHz of spectrum. Industry Canada said the spectrum cap was designed to ensure new wireless companies have enough spectrum to compete against established players. The spectrum cap came into existence just as newcomers Clearnet Communications Inc. and Microcell entered the mobile phone service market.

Telus acquired Clearnet in 2001.

According to Mark Langton of Telus Mobility, the firm was at the 55MHz limit in most of the markets in which it operates.

After a consultation process that started last October and ended this March, Industry Canada removed the spectrum cap, and said it would release at least 100MHz of new spectrum in the future.

In a statement on Aug. 27 Industry Canada said it lifted the cap because “Canada’s mobile telephone system is highly developed and cell phone users have a variety of service options.” The cap was no longer required to facilitate competition.

Telus, which began an unsolicited bid for Montreal-based wireless service provider Microcell in May, on Monday said the government’s decision to eliminate the cap “removes one of the principal approvals required” to take over Microcell.

Langton pointed out that Microcell has nearly 30MHz of spectrum across Canada. Adding that to Telus’ 55MHz would put the B.C.-based telco over the limit. Telus would need special permission from the government to operate. Now that the spectrum cap no longer exists, Telus doesn’t need unique consideration to run Microcell’s network alongside its own.

Iain Grant, an industry analyst with the SeaBoard Group, said Industry Canada’s spectrum decision could count as a significant step forward for Telus in its bid for Microcell. But, he added, it could also act as a hindrance.

Now that that spectrum cap is gone, Microcell might appear all the more alluring to other potential purchasers. Grant named Rogers Wireless Communications Inc., a Toronto-based mobile service provider, as an example. Rogers could acquire Microcell without worrying about going over the spectrum limit, he said.

Telus also has to mind what the Competition Bureau has to say about the acquisition. This government agency, charged with monitoring for commercial practices that could lead to market consolidation and higher priced services, is reviewing the proposed takeover, according to an Aug. 19 statement from Microcell.

“The Competition Bureau has designated the transactions contemplated by [Telus] as ‘very complex,'” reads Microcell’s message about the acquisition on Aug. 19. The company adds that since the deal is considered complicated, “the review…may well last into October.”

Karen Burkhout, Microcell’s spokesperson in Vancouver, said her company is glad Industry Canada lifted the spectrum cap. “The value of our spectrum will be better recognized given the current process that we’re undertaking to maximize the shareholder value.”

In the statement Microcell also said it’s entertaining “alternatives” to the Telus acquisition. “There can be no assurance that the process…will lead to any transaction.”

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