When Industry Canada announced it was planning to boost competition by setting aside certain spectrum for new competitors entering the wireless marketplace, the Conservative government promised Canadians they would see a new era of robust competition and lower prices as a result.

Today, it turns out the only competition around is watching which of the three largest wireless carriers snap up their newest competitors first.

Telus, Canada’s third largest wireless carrier, today announced it was acquiring Mobilicity for $380 million — almost exactly the amount of outstanding debt owed by the Data & Audio Visual Enterprises Holdings’ venture. That means Telus will pick up its competitor just by agreeing to pay its bills.

Mobilicity said it was burning through cash at an alarming rate and simply could not attract enough customers in its home service cities Toronto, Ottawa, Calgary, Edmonton and Vancouver, to become profitable. It also reportedly lacked financial resources to take part in a forthcoming spectrum auction that would have been critical to the company’s long-term survival.

Informal merger talks among the three largest independent carriers — Wind Mobile, Public Mobile, and Mobilicity — reportedly went nowhere.

“Mobilicity has been losing a significant amount of money every month,” Mobilicity’s chief restructuring officer, William Aziz, said today. “The financial strength of Telus will allow the business to be continued in a way that will benefit customers and employees. An acquisition by Telus is the best alternative for Mobilicity.”

But that may not be the best alternative for Canadians. Regulators are expected to scrutinize the merger and current rules do not allow Telus to acquire the spectrum Mobilicity holds until next year. But with few other expected buyers, regulators may have no choice but to allow the deal to go through.

If approved, Telus will pick up Mobilicity’s 250,000 customers and likely switch them to Koodo Mobile, its prepaid division.

Minister Paradis

Mobilicity customers could do worse. Koodo Mobile, given a “C” grade by Canadian consumers, was Canada’s highest rated wireless carrier. That disparity hints at how much Canadians loathe their current wireless options.

Bay Street investors were not surprised by the announced merger, believing competition has its limits in a marketplace dominated by three enormous telecom companies — Bell (BCE), Rogers, and Telus — all collectively holding more than a 90% share of the Canadian wireless market. Many expect the remaining independent providers to also jettison their businesses or combine them in a last stand.

Industry Minister Christian Paradis, the Conservative government’s point man on independent competition in the wireless market, was caught off guard by the apparent faltering of the new carriers.

Paradis said he remains committed to making sure Canadians have a fourth choice for wireless service in every regional market in the country. But his only assured success is in Québec, where Vidéotron — the provincial cable company — competes with the big three providers. That competition has worked in that province to hold pricing down. According to The Globe & Mail, the average monthly bill in Québec dropped to $50.36 a month in 2011 from its peak in 2009 and is on par with where it stood in 2007. In comparison, according to CBC News, the average monthly wireless bill across Canada was $77 in 2013, up from $68 in last year’s survey.

Paradis is now pondering new regulations that would prevent the three largest carriers from buying out the remaining two independent providers just for their spectrum assets.

The merger will need regulatory approval from The Competition Bureau, Industry Canada, and the Canadian Radio-television and Telecommunications Commission.

BNN reported back in April that Telus and Mobilicity were in acquisition talks. The news channel speaks with Maher Yaghi from Desjardins Securities about the implications the merger would have on the Canadian cell phone market and the prices consumers pay. (5 minutes)

http://www.phillipdampier.com/video/BNN Telus Acquiring Mobilicity 5-16-13.flv

BNN this morning reported the ball is back in Ottawa’s hands as the government tries to decide how it can salvage its wireless competition agenda. (6 minutes)

Other stories of interest:

1. Canada’s Independent Wireless Providers Capitulate With “For Sale” Signs; Telus Interested
2. Industry Minister Holds Closed Door Meetings With Big Telecoms And You’re Not Invited
3. Independent Cell Providers Resign from Canadian Wireless Telecom Association
4. Bell: If You Don’t Sell Us the Frequencies, We’ll See That Rural Canada Gets Nothing
5. Rogers Launches Astroturf Campaign to Recruit Customers to Lobby For Spectrum… for Rogers

Canada’s effort to expand mobile competition has likely failed with news that three of the most significant new independent entrants have put themselves up for sale, with one likely to be acquired by Telus, western Canada’s largest phone company.

With Bell Canada, Rogers Communications, and Telus dominating at least 90 percent of Canada’s wireless marketplace, breaking up the triopoly was unlikely to be easy, but three of Canada’s newest players that acquired spectrum just five years ago are already looking for exit strategies.

Bloomberg News reported Friday that Mobilicity is in talks to be imminently acquired by Telus for between $350-400 million. Public Mobile has hired investment bankers to find a buyer. Vimpelcom, Ltd., which owns Wind Mobile, announced it was “exploring its options, including divestment.”

The three companies have competed with the dominant players for about three years with little success. Combined, the three have not managed to achieve even a combined 10 percent market share. Most sell unlimited talk and text plans to customers that would normally buy prepaid service.

Potentially slowing any sale is a requirement that none of the independent companies can transfer their spectrum licenses until 2014, a condition of the 2008 special spectrum auction that reserved prime frequencies for new competitors and put them off-limits to larger mobile companies.

Telus remains the most likely suitor of independent providers because the company lacks the spectrum assets of its larger competitors Bell and Rogers.

Mobilicity operates its HSPA+ “4G” network on Advanced Wireless Services (AWS) frequencies in the 1,700MHz range. Although Telus has considerable spectrum in British Columbia and Alberta — its home territory — the provider has considerably less in eastern Canada, particularly in large metropolitan cities. Mobilicity has a tiny market share in the Greater Toronto Area, yet its AWS spectrum equals that of Telus in the city. Telus could find an acquisition of Mobilicity the easiest way to bolster its available spectrum for future 4G deployment and expansion.

Three small independent wireless providers hold almost as much combined spectrum as Telus holds today.

Any exit of a combination of Canada’s newest wireless players will likely be seen as a failure of the government’s efforts to bolster competition. The dominance among the three largest providers has left Canadians with high-cost plans and a wireless service contract that lasts one year longer than America’s standard two-year service agreement.

Industry Canada, the economic regulator fostering a growing, competitive and knowledge-based Canadian economy, had little to say about the news.

“Any transaction that requires regulatory approval will be considered accordingly,” said Alexandra Fortier, a spokeswoman for Industry Minister Christian Paradis. “We cannot comment on speculation.”

BNN reports industry consolidation is likely forthcoming in Canada’s wireless marketplace as Telus seeks to acquire independent provider Mobilicity. A financial analyst says the move is designed to curb budget-priced wireless service in Canada. Mobilicity would likely eventually be merged into Telus-owned Koodo Mobile, the company’s prepaid mobile division.  (5 minutes)

http://www.phillipdampier.com/video/Globe and Mail Feds aim to open up wireless market 3-13.flv

Too little, too late? Industry Minister Christian Paradis says the Harper government wants to open up the wireless market to more players with another wireless spectrum auction. But now several of Canada’s newest independent providers are all up for sale, and the country’s dominant three may end up owning one or more of them.  (2 minutes)

http://www.phillipdampier.com/video/Globe and Mail Market View Why we love to hate our wireless companies 3-13.flv

The Toronto Globe & Mail explores why Canadians hate their cell phone and mobile broadband providers so much.  (2 minutes)

Other stories of interest:

1. Bell: If You Don’t Sell Us the Frequencies, We’ll See That Rural Canada Gets Nothing
2. Independent Cell Providers Resign from Canadian Wireless Telecom Association
3. Cell Phone Companies Hoarding Cash/Credit for Spending Blitz on Canadian Spectrum
4. Canada’s Cellular Cartel: 3 Wireless Companies Control 94 Percent of the Market
5. Industry Minister Holds Closed Door Meetings With Big Telecoms And You’re Not Invited

Canada’s three major independent wireless companies have resigned from the Canadian Wireless Telecommunications Association after claiming the group maintained a consistent bias in favor of the three largest carriers in the country.

Wind Mobile Canada, Public Mobile, and Mobilicity announced their departure in a joint press release.

“From this point, the CWTA does not, and cannot claim to speak on behalf of the Canadian mobile wireless sector,” said the news release.

“It has been evident for quite some time that, rather than being a true industry association which represents the views of all players regardless of size, the CWTA has instead largely been an advocate for Rogers, Telus, and Bell, and often directly contrary to the interests of new entrant wireless carriers,” said Bob Boron, general counsel and senior vice president of legal & regulatory affairs for Public Mobile.

“We have spent the better part of three years repeatedly voicing our opposition to the CWTA on a wide range of matters to the point of issuing a press release in January 2011 that publicly expressed our dissent on the CWTA’s position on wireless consumer protection,” added Gary Wong, director of legal affairs for Mobilicity. “There seems to be a blatant disregard of the new entrants in favor of acting in the best interests of the big three carriers, and it is unacceptable.”

The carriers suggest WCTA officials lured them into the trade association to bolster claims the group represents the collective interests of Canadian mobile providers. Once enrolled as members, the independents claim their concerns were ignored on a variety of issues.

“When we first approached the CWTA, we were promised clear and fair representation on issues of true industry alignment. But despite making our objections and concerns abundantly clear on numerous occasions, the CWTA has repeatedly failed to honor this promise, leaving us no alternative but to withdraw,” said Simon Lockie, chief regulatory officer at Wind Mobile.

Among the major points of contention:

• The independents favor transparency on mobile phone bills, with better disclosure of which services are optional or mandatory, the exact pricing of those services, contract termination fees and penalties. The three major carriers oppose anything beyond self-regulation;
• The CWTA argues Canadians have a highly competitive wireless marketplace with rates to match. The independent providers strongly disagree, claiming Canadians pay some of the highest rates in the world for cell service;
• The CWTA favors and supports three-year contracts for cell phone service, the independent providers do not.

“The many contributions of Wind, Mobilicity and Public Mobile will certainly be missed, and CWTA would welcome their return to the association in the future,” a CWTA official said in a written statement.

Other stories of interest:

1. Cell Phone Companies Hoarding Cash/Credit for Spending Blitz on Canadian Spectrum
2. WIND Mobile Saves One Rural Canadian $160/Month Over Rogers’ Wireless Broadband
3. Rogers Launches Astroturf Campaign to Recruit Customers to Lobby For Spectrum… for Rogers
4. CRTC Runs ‘Show Trial’ Hearings Attacking Would-Be Wireless Competitor; Is CRTC Industry Trade Group or Independent Regulator?
5. Canadian Government Overturns CRTC, Admits Globalive’s Wind Mobile to Canadian Mobile Phone Marketplace

Upcoming wireless spectrum auctions are critically important for some of Canada’s newest players in the cell phone marketplace.  Most are working hard to make sure they have plenty to spend to secure new frequencies for advanced wireless services that will help them remain competitive with larger players.

Globalive Holdings, the parent company of Wind Mobile, has convinced backers to provide hundreds of millions of dollars in financing, so long as all of the money is spent on acquiring wireless spectrum.

Wind’s nearly 400,000 customers will appreciate the additional room for growth, and new customers may keep Wind in mind for advanced 4G networks most Canadian providers intend to build and expand into the new spectrum they acquire at an auction next year.

Much of the funding, estimated to approach nearly a half-billion dollars, is coming from Wind’s parent entities, Egypt-based Orascom Telecom and the European conglomerate VimpelCom that acquired Orascom earlier this year.  Because the Canadian government is expected to set-aside some of the valued 700MHz spectrum exclusively for bidding among new entrants in the market, Wind could walk away a big winner, particularly if other similar-sized competitors Mobilicity and Vidéotron Ltee./Quebecor have trouble raising enough money to remain competitive in the bidding.

As far as Canada’s largest cell companies are concerned, set-asides are unnecessary and they prefer a winner-take-all auction.  Rogers, in particular, has been lobbying hard to convince Canadian officials it needs access to the 700MHz spectrum up for auction to roll out service in rural communities and upgrade networks in larger cities.

Those who feel Canada’s cell phone marketplace is already too concentrated have little sympathy for Rogers’ point of view, and expect an auction free-for-all will mean the largest incumbent players will walk away with everything they can bid on.

Among smaller players, assuming the set-asides are in place, analysts expect Wind will probably secure the most spectrum, but Vidéotron is expected to stay competitive and walk away with at least some frequencies for use in its home province of Quebec.  Big losses among the smaller players could fuel calls for additional mergers and acquisitions among those carriers deemed to have been left behind.

The Canadian government is expected to be the biggest winner of all, netting a potential $3-4 billion from the spectrum sale.

Other stories of interest:

1. Rogers Launches Astroturf Campaign to Recruit Customers to Lobby For Spectrum… for Rogers
2. Capping the Cappers: Putting Limits on How Many Licenses Rogers, Telus and Bell Can Buy
3. Canadian Government Overturns CRTC, Admits Globalive’s Wind Mobile to Canadian Mobile Phone Marketplace
4. Canada’s Cellular Cartel: 3 Wireless Companies Control 94 Percent of the Market
5. Industry Minister Holds Closed Door Meetings With Big Telecoms And You’re Not Invited