Spectrum auction almost over with nearly $4.2B raised
Rogers and its Fido subsidiary will be facing new competition once the spectrum auction is over and new cellphone carriers start up.(J.P. Moczulski/Canadian Press)
The auction of cellphone airwaves is nearly over with only five new high bids placed in the final round of bidding on Friday, bringing the government's total expected haul from the sale to nearly $4.2 billion.
With bidding slowing to a crawl over the past few days, observers expect the auction — which will net new cellphone carriers — to end next week, possibly as soon as Monday. There are six rounds of bidding a day and the auction ends when no new bids are placed for two consecutive rounds.
The auction will give the government a windfall of least $4.19 billion, far more than the $1.5 billion observers had expected. The government had said it planned to use the proceeds to pay down debt, but it is unclear whether the entire amount will be used for that.
The auction's big winner looks to be Globalive Communications Inc., a Toronto-based company that sells home phone and internet services around the country through the Yak brand. After 195 rounds, Globalive held high bids on 31 of the 292 licences being sold, giving it the ability to launch cellphone services across Canada. The company, which is backed by billionaire investors in Iceland and Egypt, is on the hook for more than $443 million in licence costs so far.
It remains to be seen how the company will be structured following the auction, given that regulations limit foreign entities from holding controlling interest in a Canadian telecommunications company. Much of Globalive's funding for the auction is believed to be coming from those foreign interests.
Industry Canada will examine the structures of companies winning spectrum after the auction concludes to determine if they meet Canadian ownership requirements.
A spokesperson for Globalive could not comment, citing Industry Canada rules prohibiting participants from speaking publicly about their plans until the auction is over.
The company has been the prime beneficiary of an auction rule that reserved 40 per cent of the spectrum for new entrants, or those who currently hold less than 10 per cent of the telecommunications market. Canada's wireless incumbents, Rogers Communications Inc., Bell Canada Inc. and Telus Corp., were not allowed to bid on that spectrum, but were free to compete with all auction participants on the remaining 60 per cent.
Other potential new entrants have benefited from the rule as well, with Shaw Communications Inc., Quebecor Inc., Bragg Communications Inc. and Data & Audio-Visual Enterprises (DAVE) Inc. all positioned to win a sizeable number of spectrum licences.
Calgary-based Shaw ended Friday holding top bids on 22 licences, mostly in Western Canada. Montreal-based Quebecor, which sells television, internet and phone services through its Videotron subsidiary, ended the week holding high bids on 18 licences, primarily in Quebec, but also in Toronto.
Halifax-based Bragg, which runs cable and internet provider Eastlink, had top bids on 20 licences as of Friday, mostly in the Maritimes but also in some parts of Ontario. Toronto-based DAVE, run by local entrepreneur John Bitove, wrapped up the week holding high bids on nine licences for several cities in Ontario and Western Canada.
The newcomers, who have accounted for nearly $2 billion in bids as a group, are expected to begin building cellphone networks and go up against established players Rogers, Bell and Telus within the next year or so. As a result of the increased competition, Canada's high cellphone prices are expected to fall — an effect the government was aiming for by making the auction favourable to new entrants.
The big three carriers also look to come out of the auction holding considerably more spectrum, with Telus, Rogers and Bell holding high bids on 59, 55 and 55 licences respectively as of Friday. Between them, the three carriers' spectrum bids were worth more than $2.5 billion.
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