Verizon ‘cautiously’ exploring Canada
Verizon Communications Inc. indicated Thursday its interest in the Canadian wireless market remains in the early stages, but if it did head north of the border it would look closely at the Ontario and Quebec markets.
Fran Shammo, chief financial officer of the second-largest U.S. phone company, said Verizon’s interest in Canada is an “exploratory enterprise.”
“So again, cautiously looking at it, not ready to make the announcements today and we continue to explore and have discussions, but at this point it’s really just an exploratory exercise,” he said during a call with analysts after the company reported secondquarter profit that beat estimates after gaining more wireless subscribers on long-term contracts.
Shammo acknowledged that the Canadian market could be attractive to the New York-based carrier.
“If you look at the population of Canada, about 70 per cent of that population is between Toronto and Quebec. That’s adjacent the Verizon Wireless properties,” he said, adding that Canada’s upcoming auction of 700-megahertz wireless spectrum mirrors what Verizon launched in the United States.
He cautioned that Canada’s regulatory environment remains a consideration: “A foreign investor coming into the Canadian market and what does that mean?”
Shares of Canada’s big three wireless providers tumbled three weeks ago on reports that Verizon was in talks to buy Wind Mobile and was willing to pay as much as $700-million for the startup carrier and that it had held initial talks with Mobilicity.
Last year the federal government changed the rules for foreign investment in the telecommunications sector. Ottawa now allows foreign companies to buy 100 per cent of Canadian businesses that represent up to 10 per cent of the market, with organic growth, but not acquisitions, permitted after that.
Dvai Ghose, head of research at Canaccord Genuity, said Shammo’s comments were potentially negative for Quebecor Inc.- owned Videotron given implications for the upcoming government auction of the radio airwaves carriers need to build networks for data-hungry smartphone users.
The rules for buying spectrum in the auction scheduled for next January limit Canadian incumbents to just one block of airwaves out of four in each geographic area. But if Verizon were to enter the fray, it would be treated as a “new entrant” and permitted to bid on up to two blocks.
“The likelihood of Videotron or even all of the incumbents being able to buy prime blocks in Quebec would seem very low if Verizon buys two,” Ghose said.
He also noted that he would not rule out Verizon’s interest in Canada based on Shammo’s comments.
“In our view, Verizon may still be waiting for Board approval before it can be more definitive about its plans for Canada,” he said.
Verizon’s earnings were 73 cents a share, leaving out a one-time gain related to pensions, the New Yorkbased company said Thursday. Analysts had estimated about 72 cents on average, according to data compiled by Bloomberg.
Verizon Wireless, the company’s market-leading mobile-phone carrier, added 941,000 monthly contract users, compared with the average estimate of 836,000, according to a Bloomberg survey of 11 analysts.