Canada's spectrum auction nears end
TORONTO (Reuters) - A government auction of wireless spectrum aimed at bringing fresh competition to Canada's cellphone market has reached its final stretch, with total bids reaching more than C$4 billion ($3.9 billion) so far -- about twice the amount expected.
A range of companies that don't yet have a large wireless presence but either crave one or are weighing the business case for a regional or national push, have emerged in the bidding for airwaves over which wireless services are delivered.
With bidding expected to end soon, the three top telecom companies, which already dominate Canada's C$13 billion wireless market -- Rogers Communications Inc (RCIb.TO), BCE Inc (BCE.TO) and Telus Corp (T.TO) -- lead the pack in the dollar value of high bids across the country.
But fresh competition could mean smaller margins for the Big Three, and industry observers have warned the incumbents may have to spend more on marketing, promotions and fighting for subscribers with newcomers.
"Just the mere thought of new entry to the wireless market has made them sharpen and lower their prices," said Amit Kaminer, an analyst at telecom consulting firm SeaBoard Group.
Telus, Rogers and BCE are offering aggressive promotions in hopes of locking in customers for multi-year contracts, he said. This could thin out the potential subscriber base for any newcomers.
Among possible new contenders is a company controlled by Montreal-based media and publishing group Quebecor Inc (QBRa.TO) (QBRb.TO), which has committed C$556 million in bids. Quebecor has long said it plans to build out a network across its home province of Quebec, also BCE's home turf.
Globalive Communications, a privately held firm that offers cheap long-distance calling, has put up more than C$444 million. It has said it is confident it will be able to buy enough spectrum to become a national player.
The third participant that has caught attention is Data & Audio-Visual Enterprises Wireless, chaired by entrepreneur John Bitove. It has committed C$242.5 million in high bids. One of Bitove's partners in DAVE Wireless is the investment arm of Vulcan Inc., an organization founded by Paul Allen, a co-founder of software giant Microsoft Corp (MSFT.O).
A fourth bidder that could reshape the wireless landscape is Shaw Communications Inc (SJRb.TO), a Western Canadian cable and communications group. It has put up C$205.4 million so far. Still, its chief executive has warned that just because Shaw participates in the auction does not mean it will build out a network.
Because the prices of spectrum are being bid up faster and higher than expected, there is more pressure on the newcomers to set up partnerships to share the costs of a national wireless push, Kaminer said.
"What I think we're going to see is more motivation for the new entrants to co-operate instead of just compete with each other," he said. "Their interests are more aligned and they will be better as a group than each on its own."
Quebecor, which is focusing its efforts in Quebec, could partner with Globalive to give it access to markets outside the province, for example.
Kaminer said such a deal could give the new entrants market power when buying handsets from cellphone makers as well as let them share network infrastructure costs.
Meanwhile, Rogers leads the bidding overall with C$949 million, Telus is next with C$847.5 million committed and BCE has C$728 million in high bids.
Currently, about C$4.2 billion has been raised by the auction, which began in late May and is expected to wrap up at any time.
The process continues for as long as there are new bids being tendered. So far, after more than 200 rounds, new bids are trickling in at four per round -- compared with 298 in the first round.
The auction will not be declared finished immediately after no new bids are received. Instead, managers will wait for a period without any activity before bringing down the hammer.
($1=$1.02 Canadian)
(Reporting by Wojtek Dabrowski; editing by Rob Wilson)
