Wind buys spectrum
Wind Mobile Corp. has almost tripled its spectrum holdings after winning licences in some of Canada’s most densely populated provinces at a bargain price in the federal government’s latest auction. But the upstart still faces major financing needs to build the infrastructure that could make it the fourth national carrier that Ottawa has wanted for years.
The company won licences to AWS-3 spectrum that were set aside for small carriers in British Columbia, Alberta and southern Ontario for the reserve price of $56.4 million, Federal Industry Minister James Moore announced at a news conference Friday in Toronto. He said rival Mobilicity did not table a bid in any region, confirming a report first published this week by the Financial Post that revealed Mobilicity was unable to secure additional financing before Tuesday’s deadline for sealed bids.
This week’s auction operated under a sealed-bid, second-price format, meaning the highest bidder has to pay the amount bid by the second highest bidder in each market. Since Wind was the lone bidder in each region, it will pay the reserve price Industry Canada set for the licences.
Wind’s new arsenal of valuable spectrum, which boosts its total holdings by 180 per cent, gives the fledgling operator the foundation it desperately needs to try to expand its operations nationally. While Friday’s auction results are a much-needed victory for recently recapitalized Wind, the company still needs to build and maintain a strong, reliable long-term evolution (LTE) network that will entice new subscribers and keep satisfied the more than 800,000 currently on its network.
“It’s been a long, winding sevenyear road to finally get Wind on a very solid path to a fourth-carrier position in the market,” Anthony Lacavera, Wind’s founder and chairman, said in a telephone interview after the provisional winners were revealed. “We’ve now acquired enough spectrum to position the company with LTE services, so over the next 12-24 months we’ll be rolling out LTE across our network.”
Even if Wind wanted to deploy its network sooner, it wouldn’t be able to since handsets will not function on AWS-3 airwaves until later this year or in early 2016, according to Lacavera. He estimates Wind will need to invest a minimum of $300 million to develop the new LTE network over the next few years.
Exactly how Wind will raise the money it needs to fund these lofty expansion plans in a sector so reliant on capital expenditures is unknown, says Canaccord Genuity analyst Dvai Ghose.
“While Wind has won a lot of spectrum at a bargain basement price,” Ghose wrote in a note to clients Friday, “it is not clear who will finance its network upgrades.”
He had forecast that the 30 MHz of spectrum available in southern Ontario, Alberta and B.C. would fetch as much as $272 million, a steep premium to Wind’s bill for the licences.
Lacavera is adamant the company will “assess all financing alternatives: equity, debt, public, private.” He also noted Wind “did not win (any spectrum licences) in Ottawa so we still have a spectrum shortfall there.”
The company will very likely seek to improve its coverage of the region and it can try to do just that this spring, as the federal government is set to open bids for the 2,500 MHz spectrum band on Apr. 14.