Verizon Communications (NYSE:VZ) is putting on hold potential deals with fledgling Canadian wireless carriers Wind Mobile and Mobilicity, according to a Globe and Mail report. Instead, the company is deciding whether it wants to participate in Canada's upcoming 700 MHz auction.
The report, citing unnamed sources, said that Verizon has decided to delay pursuing any Canadian acquisitions until after the auction in January. If Verizon participates in the auction and wins the highly coveted airwaves, deals with the two companies might come back into play next year, the report said. It's unclear what prompted the change in strategy, the report added, though Canada's incumbent wireless carriers have been vociferously opposed to allowing Verizon to enter to the market.
A Verizon spokesman declined to comment. Wind and Mobilicity declined to comment as well, according to the report.
As the report notes, Canada's 700 MHz auction is not set to start until Jan. 14, though carriers must apply by Sept. 17 and submit a refundable deposit. However, after that point potential bidders cannot negotiate with other bidders until 2014.
During Verizon's second-quarter earnings conference call in July, Verizon Communications CFO Fran Shammo said that Verizon is interested in exploring options to enter the Canadian wireless market, but he stressed that it is "really an exploratory exercise for us." He said most of Canada's population is between Toronto and Quebec, and that aligns with Verizon's coverage. He also said Canada's 700 MHz spectrum auction will auction off licenses that align with Verizon's own 700 MHz holdings.
Verizon reportedly made an initial offer of somewhere between $600 million and $800 million to buy fledgling Canadian wireless carrier Wind Mobile. Reports have also indicated that Verizon is in talks with rival wireless startup Mobilicity over a possible deal.
Telus, Bell Mobility and Rogers Communications dominate around 90 percent of the market in Canada, and the 2008 AWS spectrum auction did little to break their hold on the market. Telus tried to buy Mobilicity earlier this year for around $363 million but the deal was blocked by the government. Wind and Mobilicity are financially weak, and any delay in a deal for them could imperil their long-term plans, the report noted.
Canada's government last year relaxed restrictions on foreign ownership in small telecom companies with market share of 10 percent or less, in the hopes of increasing competition for incumbent carriers. The government also released new rules that will require all spectrum transfer requests to be reviewed.
Canadian industry leaders as well as executives from Canada's three largest wireless carriers have undertaken a major public relations campaign against Canadian government regulations that could pave the way for Verizon to enter the Canadian wireless market. However, the government appears to be resisting such pressure and remains open to foreign investment in the market. "We want all regions of Canada to benefit from competitive market forces, which is why more progress must be made," Canadian Industry Minister James Moore said recently. "We will continue to stay the course by ensuring Canadians benefit from a competitive telecommunications industry."
- see this Globe and Mail article
- see this Reuters article
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