Government wireless airwaves auction underway

Shaw Communications Inc. and a group headed by Yak parent Globalive Communications Corp. were the two most aggressive new players in the first day of a government auction of wireless airwaves that began Tuesday, an auction the government hopes will pave the way for increased competition and lower prices in Canada's cellphone market.

Through two rounds of bidding in a process that could take as long as a month, the federal government's auction of wireless spectrum had drawn more than $560 million in bids from cable and telecommunications companies hoping to add to their stake in the wireless market. Theauction will continue as long as bidding continues.

Canada's three big providers Rogers Communications Inc., Bell Canada Inc., and Telus Corp. are all competing in the auction of 105 megahertz of radio spectrum, which is used to carry the signals of cellphones.

But the auction has attracted unprecedented interest because of rules set by Industry Canada that set aside 40 megahertz of the airwaves for new entrants, opening the door to new regional and possibly national competitors for customers in the wireless industry.

While the first day's results may not be representative of the final outcome, IDC Canada telecommunications analyst Lawrence Surtees said the results show many of the new entrants are "serious in their intent."

Through two rounds, Calgary-based Shaw had the highest bid so far in 41 regional licences bids that total $153 million and stretch from northern Ontario to British Columbia.

Toronto-based Globalive had the highest bidso far foronly eight regional licences, but they have been aggressive bids, totalling about $135 million, in high population areas, including in Toronto and Montreal.

Globalive, which resells phone and internet services through its Yak brand,is bidding in conjunction with two foreign companies. Egypt-based Weather Investments, which owns cellphone companies in Italy and Greece, as well as Novator, which has funded new wireless entrants in its Iceland home and in Poland, are part of Globalive's bid.

Quebecor-owned Videotron got off to a strong start in round one but lost much of its ground in eastern Canada and southern Quebec to Globalive in the second round. Quebecor currently has the highest bid in 19 regional blocks, mostly in Quebec and Ontario.

Among other regional telecommunications companies, Manitoba Telecom Services Inc. (MTS Allstream) has the current high bid in nine regions, all but one in Manitoba, while Sasktel leads in three areas in Saskatchewan.

MTS Allstream's bid to be a national player may have suffered a blow last week when the company revealed that its partnership with two high-powered investors, the Canada Pension Plan Investment Board and U.S.-based private equity firm Blackstone Capital Partners, had fallen apart just days before the start of the auction.

Toronto entrepreneur John Bitove's Data & Audio-Visual Enterprises (DAVE) Wireless Inc. had, through two rounds, bid on only four regions and did not have a high bid in any of them.

Among established carriers, Telus is the current leader for 60 new regional licences, while Bell leads in 42 and Rogers in four.

The process, however, is still in its early stages, with two more rounds scheduled for Wednesday and another four rounds each day on Thursday and Friday. Under auction rules, the minimum bid in each round must be 15 per cent higher than the highest bid of the previous round.

Government hopes to raise $1B

The auction could last as long as a month, Industry Minister Jim Prentice said Tuesday. It ends when there are no more bids on any of the regional spectrum blocks.

Following the close of the auction, winning bidders will be required to submit ownership and control documentation and to complete various payment transactions within 30 business days, Industry Canada said.

The government had hoped to raise more than $1 billion through the sale of the airwaves, and has to be encouraged by the early results, said Surtees.

"The fact that there were more than two dozen qualified applicants speaks to the intense interest in this auction," he said.

The next few days should be interesting, Surtees said, and could reveal whether a new national player or group of smaller regional players will emerge to compete with the big three carriers.

Winning bidders are expected to begin building cellphone networks and competing with the country's three established players by early next year.

Regardless of who wins, the new competition should lead to lower prices for consumers, Surtees said.

"There's going to be aggressive pressure on the state of prices in the wireless market," he said. "I think we're headed to a new renaissance regardless of whether competition comes from a national or regional carriers. And that's what the government is hoping for with this auction."