>VERIZON DELAYS DEALS
U.S. telecom giant may focus on spectrum auction before buying into Canadian carriers
U.S. company is reportedly putting off purchase of Canadian wireless carriers Wind and Mobilicity,
U.S. wireless giant Verizon may not be rushing into a shopping spree for struggling small Canadian wireless carriers like Wind Mobile or Mobilicity after all.
A report Wednesday night by the Globe and Mail, which quoted anonymous sources, says Verizon is thinking of backing off on any immediate acquisitions so as to focus instead on Ottawa’s long-awaited spectrum auction scheduled for next January.
And if it wins access to some of these prime 700-megahertz airwaves, considered the most desirable ever available for carrying voice and data, it may then consider buying into these smaller cellphone carriers, the report said.
“All the pieces have to fall into place for Verizon to pursue a deal,” tech analyst Carmi Levy told the Star Wednesday night. “Verizon isn’t going away. It’s biding its time.”
That’s in part because Canada’s wireless giants Bell, Rogers and Telus recently launched a vocal PR campaign against Verizon, the largest carrier in the U.S., complaining current Canadian rules gives foreign competitors an unfair advantage. “The PR campaign by the incumbents has shown Verizon that it isn’t going to be a cakewalk to come into Canada. It has to be prepared for a fight,” Levy said. Verizon officials did not respond to requests for comment. The Canadian wireless companies have called for changes to the existing rules, arguing it’s unfair that Verizon could buy up small wireless carriers, which are desperate to find a company with deep pockets, and thus be eligible to bid on prime spots in the spectrum. But the federal government is holding firm, refusing to change its policy. “Our government has pursued extremely consistently and extremely clearly a policy of fostering greater competition in this industry for the benefit of consumers,” Prime Minister Stephen Harper told reporters last Friday. Industry Minister James Moore has gone so far as to suggest the Canadian cellphone giants have been “dishonest” and “misleading” in their campaign, which won support from business groups and unions. The Canadian telecoms complain that federal rules permit foreign firms like Verizon the right to buy smaller Canadian startups while denying that opportunity to larger Canadian companies. Furthermore, under Ottawa’s rules for the upcoming auction, new entrants into the market have the right to bid on two of four prime blocks of spectrum, while Bell, Rogers and Telus are limited to one block apiece. It is unclear how Verizon, if it does not have ownership in an existing Canadian carrier, might be able to participate in the auction, for which deposits are required on Sept. 17. If the small carriers don’t find a saviour in time, it may force Ottawa to delay the auction. Private equity firms including Birch Hill, have also been floated as potential buyers.
Officials at Bell and Rogers did not respond to emails seeking comment. Telus told the Star it did not want to comment yet.
One industry player, who said he had not heard that Verizon was backing away from its acquisition plans, speculated this could merely be part of a negotiating tactic to push down the purchase price for one of the wireless carriers, or even for both.
Or, he said, it could be part of a strategy to win more concessions from the government — on domestic roaming fees or rural services, for instance.
Dvai Ghose, an analyst with Canaccord Genuity, wrote in a note to investors Wednesday evening that this may be a prudent move for Verizon.
“If it committed to acquiring Wind and Mobilicity before the auction, Verizon may have no choice but to bid aggressively for spectrum at even unreasonable valuations to avoid the scenario of being stranded with Wind and Mobilicity and no significant 700 MHz spectrum,” Ghose wrote. “Waiting until after the auction could lower the valuation of the new entrants.”
As well, he said Verizon, by delaying its decision on whether to enter Canada until after the auction, “eliminates any risk that the government does a U-turn.”