Verizon Communications (NYSE:VZ) is considering jumping into the Canadian wireless market by taking over one of the smaller players struggling against Canada's mobile incumbents, according to a report in the Globe and Mail newspaper.
The report, citing unnamed sources, said that the Canadian government wants to have at least four major wireless carriers in all of Canada's regional markets to bolster competition, and it views foreign investment in one of the struggling smaller players as a way to ensure that. Verizon has held exploratory talks with Wind Mobile investors, according to the report, which also named AT&T (NYSE:T), Vodafone and Telenor as potential investors.
Wind and Mobilicity are failing to turn a profit despite working to lower market prices. The carriers are competing against larger incumbents Telus, BCE's Bell Mobility and Rogers Communications. Mobilicity tried to sell itself to Telus but the government blocked that on the grounds that one of the smaller competitors should not be gobbled up by a larger player. The government has relaxed foreign ownership restrictions to spur more competition in the wireless market, but the sale of Wind by VimpelCom has been tied up amid national security concerns from the Canadian government, the Globe and Mail reported.
A Verizon spokesman declined to comment, as did representatives from Wind and VimpelCom, according to the report.
The idea would be for Verizon to buy Wind or Mobilicity and participate in an upcoming spectrum auction. Such a move would, in theory, lead to more competition on price and put pressure on the incumbents. "They [Verizon] are definitely taking a hard look right now," said one source.
Canada's wireless market has long been dominated by incumbents. Earlier this month the Canadian Radio-television and Telecommunications Commission (CRTC), Canada's version of the FCC, made several regulatory changes intended to spark more competition. The agency said customers can cancel their wireless contracts without fees after two years (contracts had been three years) and it also set limits of around $50 per month for data overages and $100 per month for international data roaming charges to prevent bill shock.
Until now, speculation about what Verizon might do in foreign markets has centered on whether and when Verizon might buy Vodafone's 45 percent stake in Verizon Wireless. Verizon will pay a $7 billion dividend to parent companies Verizon Communications and Vodafone by the end of June. Verizon executives have said they want to pay down $5 billion in debt at Verizon Wireless after that and also build up cash reserves to participate in the incentive auctions of broadcast TV spectrum scheduled for 2014 in the United States.
For more:
- see this Globe and Mail article
- see this Reuters article
- see this separate Reuters article
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