Wind Mobile backs out of 700 MHz spectrum auction

Wind Mobile is dropping out of the 700 megahertz spectrum auction on Tuesday after failing to get financial support from its parent company,VimpelCom.

The announcement, disclosed Monday on the Industry Canada website, leaves mainly the big three telecom companies Telus, Rogers and Bell in the running for airwaves that will allow consumers to connect to a new generation of devices.

It does not look as if the government will see a sustainable fourthwireless playerTelecomanalyst DvaiGhose

"From Wind Mobiles perspective, there will be no change in our day-to-day business as a result of this decision," the company said in a written statement. "Wind Mobileremainsfirmly committed to serving our customers and we are determined to continue to be a vital influence on mobile competition in Canada."

For its part, the government saidWind's withdrawal doesn't change the fact that Tuesday's auction will ultimately help consumers.

"While we will not speculate on the results of the auction, we do know the outcome will be positive for consumers because high-quality spectrum will soon be available across Canada, providing Canadians with dependable, high-speed wireless services on the latest technologies," Industry Minister James Moore's press secretary Jake Enwright said in an emailed statement to CBC News.

But others say the move deals a blow to the federal governments plan to introduce competition in the telecom marketplace and lower prices for consumers.

• 700 MHz wireless spectrum auction FAQs

• Canadians deserve cheaper mobile rates, James Moore says

Telecom watchers say that without Winds bidOttawa has failed in its efforts to create a fourth player in thetelecom market in Ontario, Alberta and British Columbia.

"It is now not at all clear who will buy the fourthprime block in Ontario, British Columbia and Alberta,"telecom analyst DvaiGhose with Canaccord said in reaction to the news.

U.S.-based telecom giant Verizon was rumoured to be interested in participating in the auction either by itself or by buying Windbut poured cold water on those rumours last fall and formally said it had no plans to enter Canada.

• Spectrum auction won't include foreign bidders after all

Private equity firms such as Birch Hill Equity Partners andCatalyst Capital Group Inc. also made overturesto participate in the auction, raising hopes for the tantalizing option of a deep-pocketed new wireless player in Canada. But they, too, soon decided to pull out.

"This clearly shows that like private equity, foreign carriers are not interested in becoming wireless new entrants in Canada and follows Verizons decision not to enter Canada," Ghose said.

Other small new entrants are non-starters Mobilicity is under bankruptcy protection, while Public Mobile was sold to Telus Corp. late last year.

Feenix Wireless, a startup backed by Mobilicity founder John Bitove, remains on the list of participants. As do regional players like Eastlink, SaskTel, Bragg, Novus Wireless and Videotron.

Wireless costs are down almost 20 per cent in markets where Wind operates. It is a sad day for competition and real choice for Canadian consumers and businesses that Wind is unable to participate in the 700 MHz auction, Wind Mobile CEO Anthony Lacavera said in a statement.

Wind, operating in Canada under the nameGlobalive Wireless Management, has faced huge obstacles since entering the Canadian market in 2008, but has managed to snag 650,000 customers with its lower rates.

Amsterdam-based VimpelCom Ltd., Winds main investor, told the government of its intention to withdraw from the 700 MHz spectrum auction earlier Monday.

"Wind Mobiles shareholderVimpelComdecidednottofundWind Mobilesparticipation in thisauction, butconfirmed that it remains in discussionswith the federal governmentandWind Mobiles other shareholder AAL Holdingto craft a path forward that will continue to build Wind Mobile as a strong competitor in the Canadian wireless market," Wind Mobile said in a statement.

The parent, with backing from Russia, has run afoul of Ottawas foreign investment rules, which prevent it from taking full control of Wind.

Ottawas decision to block the sale of MTSAllstream to Egyptian billionaire Naguib Sawiris because of unspecified national security concernsalso spookedVimpelCom.

In an interview with CBC's The Lang & O'Leary Exchange, Lacaverasaid that Ottawa's waffling over foreign ownership discouraged his investors.

"The uncertainty around how the business can be controlled and owned, it shook investor confidence, and the Allstream decision that happened back in October that being rejected put a cog in the wheel," Lacavera said.

He said Ottawa is sendingmixed messages abouttelecom.

"In many respects its even worse than 'were closed for business,' because at least closed for business is definitive.This is its uncertain, its unclear as to exactly what will rule the day and investors, as you know, hate uncertainty. We need a clear picture as to whats going to be permitted and whats not going to be permitted," Lacavera said.

Lacavera said his company hopes to bid in later spectrum auctions.

"This announcement shows that there is no real strategic or financial interest in financing Canadian wireless new entrants, with the exception of Vidotron and EastLink in their home markets," Ghose said.

"Despite its intentions, it does not look as if the government will see a sustainable fourthwireless player in Ontario and Western Canada," Ghose said.