* Shaw plans to sell prized spectrum to industry giant
* Canada industry dominated by three major players
* Government wants to boost competition, cut prices
OTTAWA, April 15 (Reuters) - Canada's industry minister signaled on Monday he is unhappy with Shaw Communications Inc's plans to sell wireless spectrum to rival Rogers Communications Inc, a move that would add heft to Rogers, already one of three dominant players in the market.
In 2008, Shaw, based in Western Canada, bought some of the spectrum the Conservative government had set aside for new entrants in the mobile telephony market as part of a plan to encourage more competition for the big three: Rogers, BCE Inc's Bell Canada and Telus Corp.
"The intent of the policy was not to have this set-aside spectrum to end (up) in the hands of incumbents," Industry Minister Christian Paradis told reporters on a conference call when asked about Shaw's plans.
Consumer and advocacy groups want Paradis to block the sale.
All spectrum license transfers must be approved by the federal industry ministry, giving Ottawa an effective veto.
In March, the government announced public consultations on the transfer of spectrum licenses, in particular on whether such proposed sales would affect the efficiency and competitiveness of the Canadian telecommunications market.
Once the consultation period is over, the Conservatives will announce new criteria for license transfers.
Canada's wireless market has some of the highest charges in the developed world. Rogers, Bell Canada and Telus together command a 90 percent share.
Despite the government's moves to boost competition the new entrants are struggling in a market of 34.5 million people stretched across the world's second largest country.
Newcomers include Wind Mobile, a carrier in the process of being acquired by Amsterdam-based VimpelCom Ltd, as well as closely held Mobilicity and Public Mobile.
Speculation is rife that some or all of the young companies might look to be bought by either the domestic big three players or by other deep-pocketed investors willing to enter the market.
"I acknowledge that this is a fierce sector in terms of competition ... consolidation of course might occur," Paradis said.
"But I think that we are on the right track in terms of policy. Of course it's a work in progress ... I still remain confident that we will achieve our goal (of increased competition)."
In March, Paradis said the government would start the process of auctioning more prime wireless spectrum on Nov. 19 and announced other steps designed to stimulate competition and reduce high roaming charges.
Last year, he reduced foreign investment restrictions on small carriers that have a market share of 10 percent or less.