Will easing of government wireless policy push sale of Quebecor spectrum?
Recent mergers lead to speculation about Shaw or Big Three as potential buyers
An apparent easing in the federal government’s policy aimed at encouraging four national wireless carriers raises the question of whether Quebecor Inc. will sell its non-core spectrum to Shaw Communications or wait for a better offer from the Big Three.
Industry watchers have long pegged Shaw, which is investing in its Freedom Mobile network in a bid to become a more appealing fourth player, as a potential buyer for Quebecor’s spectrum in places where its carrier Videotron doesn’t offer wireless service — Toronto, other parts of Ontario, Alberta and British Columbia.
Analysts previously noted that regulators might reject any attempt by Quebecor to transfer the spectrum to Rogers, Bell or Telus, given the federal government’s objective to encourage four wireless carriers in each region.
But recent mergers — the federal government approved BCE Inc.’s $3.9-billion purchase of Manitoba Telecom Services last week with the caveat that Xplornet enter the market as a micro fourth player — “reflect an easing regulatory environment,” Barclays analyst Phillip Huang noted Tuesday.
“While the government is maintaining a four-player market, it appears less concerned with the strength of the fourth player,” Huang wrote to clients last week.
Xplornet has never before offered mobile services, although it does offer fixed wireless Internet connections along with satellite services in rural and remote areas across the country.
“We believe this suggests that Videotron may be able to explore selling its non-core spectrum to the Big Three in 2018/2019, once the five-year moratorium on spectrum transfer expires,” Huang wrote. “It may be in Videotron’s interest not to rush into a deal with Shaw.”
Scotiabank analyst Jeff Fan wrote earlier this month that it would be the right move for Quebecor to wait for a higher offer from an incumbent if the government dropped its fourth player policy. If the government maintained the policy, he estimated Quebecor could sell its spectrum to Shaw for between $410 million and $630 million in a “win-win” transaction.
But given the Bell-MTS approval, Fan wrote Tuesday that any deal between Quebecor and Shaw hinges on whether the federal government approves Quebecor’s option to transfer its Toronto spectrum to Rogers.
The Bell-MTS approval suggests regulators won’t have any concerns about Rogers getting the Toronto spectrum based on concentration, he wrote, although it also signals that any transaction must benefit a fourth player.
As such, the government could place conditions on the transfer that results in a deal between Quebecor, Shaw and Rogers, Fan wrote. Such a scenario would be best for Rogers since it would take longer for Shaw to improve its network in Toronto, he added.
While (Ottawa) is maintaining a four-player market, it appears less concerned with the strength of the fourth player.