Regional partners seen as best bet for Videotron's wireless spectrum buy
MONTREAL - Quebec's dominant cable TV and Internet provider may have scooped up enough wireless capacity in the latest spectrum auction to take on Canada's three big carriers, but analysts say Videotron is more likely to partner with regional telecoms in any expansion.
Videotron now has about 500,000 wireless customers in Quebec since it launched in 2010 and its parent company Quebecor spent $233 million in the auction for spectrum licences not only in Quebec, but also Ontario, Alberta and British Columbia.
Industry Minister James Moore said he believed that Videotron had the capacity to become the fourth national wireless company that Ottawa has been seeking in order to improve competition and reduce costs to consumers.
But analysts say Videotron's low profile outside of Quebec, and the high cost of muscling its way onto the national stage to compete with Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T), would make it difficult.
"(The name) Videotron, itself, doesn't have cachet once you go beyond Quebec," telecom analyst Iain Grant said Thursday.
Grant sees the company partnering with players such as Wind Mobile, which needs more spectrum to expand its cellphone network but couldn't afford to participate in the auction. Wind has more than 650,000 subscribers in Ontario, Alberta and British Columbia but has been put up for sale by its owner.
It could also join with Eastlink, which offers cable service in parts of Ontario, Alberta and British Columbia, to build up cellphone service in those regions or in Atlantic Canada.
Videotron also could strike a similar deal with Calgary-based Shaw Communications or Quebec-based Cogeco, said Grant, managing director of the SeaBoard Group.
Or, it could strike roaming agreements with big competitors, such as Rogers, to give its Quebec-based customers better rates when they leave the province, he said.
Quebecor chief executive Robert Depatie said Wednesday's auction results left the company well equipped to develop its network. Videotron won spectrum that Wind Mobile likely would have bid on.
"Given the way the auction unfolded, Quebecor Media could not pass up the opportunity to invest in licences of such great intrinsic value in the rest of Canada,'' Depatie said.
"We now have a number of options available to us to maximize the value of our investment.''
The auction brought in a record $5.27 billion for Ottawa, with Rogers being the biggest bidder for the 20-year licences. It spent $3.29 billion for 22 licences across the country, except in the Yukon, Northwest Territories d Nunavut.
Telus (TSX:T) spent just over $1.14 billion for 30 licences, while Bell spent (TSX:BCE) $565.7 million for 31 licences.
Building a high-speed network outside Quebec could cost a half a billion dollars or more. There's also the question of hiring staff and renting stores in order to go into new areas as an unknown.
Analyst Troy Crandall said parent company Videotron doesn't have "a lot of additional room on its balance sheet" to expand its wireless service nationally.
Quebecor's media division, which includes the Sun Media group, has been losing money and cutting jobs, while Quebecor as a whole had consolidated debt of $4.95 billion as of Sept. 30, the latest date for which figures are available.
"They have no brand recognition outside Quebec," he added. "We know it's a tough slog against the big three."
But Videotron could also sell its spectrum to a foreign telecom or U.S.-based Verizon, said Crandall, of investment firm MacDougall, MacDougall and MacTier.
"If somebody from outside Canada finally decided to enter the country, that asset might be a nice desirable asset to sell and probably at a nice profit for them, too, as long as the government allows it."
Rogers, Bell and Telus led a charge against the possibility of Verizon entering Canada's wireless market and the big U.S. telecom eventually decided late last summer to take a pass on heading north.
CIBC analyst Robert Bek said he doesn't expect Quebecor (TSX:QBR.B) to rush into anything.
"There are plenty of options available to the carrier and we believe that the company is not looking to roll out a plain vanilla wireless roll-out beyond Quebec without the bundling or brand advantages the company currently enjoys with Videotron in Quebec," Bek wrote in a research note.
"There are plenty of other options to extract value from this transaction."
In total, the auction saw some 10 bidders participate, with eight of them winning licences.
Read more Business News
- Dead rock climber identifiedPenticton / S. Okanagan - 1:54 pm
- Man rescued from lakePenticton / S. Okanagan - 12:31 pm
- Mom petitions govt, teachersKelowna - 2:56 pm
- Students lament on strikeBC - 1:40 pm
|QHR Technologies Inc||1.18||-0.01|
|Anavex Life Sciences||0.24||-0.01|
|Copper Mountain Mining||2.90||-0.03|
|Sunrise Resources Ltd||0.025||0.00|
|Mission Ready Services||0.225||-0.02|
You can’t manage what you can’t control! You can’t manage the number of sales you’re going to make but you can manage the behaviour that will help you make those sales. Obvious...
Apple has taught many entrepreneurs the importance of design, how to create buzz when introducing new products to the marketplace, how to pioneer new technology and the importance of superior quality....
Move over “big guys” there’s a new brokerage in town featuring local expertise, long standing experience and a fresh boutique approach. Kelowna, August 31 2014 – You may have...