Wind Mobile has confirmed it’s dropping out of Tuesday’s wireless spectrum auction, leaving just 10 bidders to vie for the licenses to operate within the coveted 700 megahertz spectrum.
One day before the auction is set to take place, Wind has said it will no longer be making any bids as its main shareholder, VimpelCom Ltd., has decided not to fund Wind during the auction. The company is based in the Netherlands.
“We decided that we were not going to sponsor or fund Wind Canada’s participation in the 700 MHz spectrum auction at this time as we remain in discussions with the shareholder with majority voting rights and the government to craft a path forward to develop Wind Canada as a strong fourth player in Canada. We hope to have an opportunity in the future to perhaps re-apply and bid on spectrum, should the government decide to re-open another 700 MHz spectrum bid process,” VimpelCom said in an emailed statement.
Industry Canada put the announcement on its site today, indicating Globalive Wireless Management Corp., or Wind, had listed its status as “withdrawn.”
In an emailed statement, Wind confirmed it was withdrawing, but it said it was still in talks with the federal government and its other shareholder, AAL Holding, to “continue to build Wind Mobile as a strong competitor in the Canadian wireless market.”
“Wind Mobile remains firmly committed to serving our customers and we are determined to continue to be a vital influence on mobile competition in Canada,” said the statement from Wind. The carrier serves more than 600,000 customers and had planned to use its block of spectrum to upgrade its network to LTE.
“In a few short years, we’ve grown into the country’s fourth wireless carrier, with more than 650,000 subscribers, and we’re looking forward to bringing True Mobile Freedom to even more Canadians in the future.”
Wind’s CEO, Anthony Lacavera, was also upbeat about the news Wind wouldn’t be participating in the auction. He took to Twitter to say things will continue as usual:
It is business as usual at Wind – we do need more spectrum so I am not happy we had to withdraw from 700 but onwards and upwards for here!
— Tony Lacavera (@TonyLacavera) January 13, 2014
While Wind is calling itself “the country’s fourth wireless carrier” in its statement, it may be difficult for the government to find another carrier that can compete with Bell Canada Enterprises Inc., Rogers Communications Inc., and Telus Corp., the wireless industry heavyweights known as the Big Three.
The Conservative government said it is trying to secure a berth for a fourth carrier across Canada to offer consumers more options and more competitive pricing. However, with Wind out of the auction, it may prove difficult to place that fourth carrier in Ontario, Alberta, and British Columbia, especially with Mobilicity in bankruptcy protection and the sale of Public Mobile Inc. to Telus in October 2013.
One reason for Vimpelcom’s reluctance to fund Wind’s participation in the auction could be due to the government’s regulations, designed to push for competition, said telecommunications industry analyst Mark Goldberg.
“Unfortunately Canadians are paying the price for … rules that are simply too unstable, inconsistent and at times incomprehensible,” he said in an interview with IT World Canada.com editor Howard Solomon.
However, with Wind’s exit from the auction, there are still some smaller regional competitors in the form of Vidéotron Ltd. in Quebec, Manitoba Telecom Services Inc. in Manitoba, Eastlink in the Maritimes, and Saskatchewan’s SaskTel.
However, it’s unlikely any of these carriers will bid in Ontario, Alberta or British Columbia – and this is a problem for the Conservatives, said Dvai Ghose, an analyst at Canaccord Genuity, in a note to investors.
Wind’s withdrawal “is a big surprise and a major blow to the Canadian government, as Wind is the largest Canadian new entrant with 650,000+ subscribers and is the only new entrant with a foreign carrier that has financed its operations and spectrum,” he noted.
“On the other hand given 1) VimpelCom’s clear indication that it wants to exit Canada; 2) Industry Canada seems to be blocking AWS new entrant sales to incumbents, even after their five-year set asides expire, and sale to an incumbent is the only obvious exit strategy for VimpelCom; 3) Industry Canada never approved VimpelCom’s application to assume control of Wind from Tony Lacavera, leaving us to wonder why VimpelCom would want to continue to finance Wind, when it does not even control the asset; 4) Wind’s results to date have been consistently underwhelming; and 5) even if VimpelCom had purchased the 4th prime block of 700 MHz at the reserve price in Western Canada and Ontario (there is now no obvious buyer of the 4th prime block in these markets), it would still have to pay over $100 million for spectrum at the reserve price and build LTE at the cost of several hundreds of millions of dollars, perhaps the announcement is not such a surprise.”
The last spectrum auction, held in 2008, saw the federal government collect about $4.25 billion, while this current auction is only expected to raise roughly $2 billion.
Twitter reaction has been swift, with some users decrying Wind’s announcement:
— Anthony Roma (@LaRomanBomber) January 13, 2014
Wind Mobile pulls out of spectrum auction – The Globe and Mail http://t.co/CBXSyGvjH1 Devastating…. Devastating…Devastating
— Ronell I.T. Man (@Ronell_j) January 13, 2014
— Jason Lavigne (@jasonlav) January 13, 2014
With files from Howard Solomon