Digital TV and wireless Internet provider Look Communications, which at one time had sought bankruptcy protection, is now considering the sale of its entire business with 92 MHz of licensed spectrum in the 2.5 GHz band as the carrot to lure potential buyers.
Look vice-chairman and CEO Gerry McGoey said that the company has retained the services of investment banking firm Greenhill and Co. to entertain bids from interested parties. He said that a number of potential bidders have come forward, but declined to say who. McGoey added that there was no predetermined timeframe around the sale of the assets, but said that he does not expect it to be a long process.
The company is also open to partnerships and other financial arrangements. “We’re looking at any possible transactions that could occur that would maximize shareholders’ benefits,” he said.
McGoey said he feels confident the spectrum is of value, particularly in light of recent public sector decisions. In March of this year, for example, Industry Canada confirmed that the 2,500- 2,700 MHz range is designated for mobile use and will be harmonized with a U.S. plan for mobile services. The CRTC has also confirmed that Look’s broadcast licence permits it to offer mobile TV.
The company is currently operating a beta test site for mobile TV in the Milton, Ont., area, reaching a potential audience of 55,000 over a 30 sq.-km. area.
McGoey said that the recent sale of spectrum in the U.S. by the Federal Communications Commission, which resulted in a bidding spree from various satellite and mobile operations, is a good indication that Look’s spectrum would be of interest to Canadian operators.
“The cable companies in the U.S. have bought spectrum because they realize they have to have mobility, both for broadcasting TV and for voice and data,” said McGoey. “That trend is coming to Canada.”
But spectrum may not be the cash cow it once was, said Roberta Fox, principal of FoxGroup Consulting, a telecommunications analyst firm based in Mount Albert, Ont. A lot of spectrum that has been bought in previous years in Canada has been underutilized, or else was bought speculatively purely as an investment, she said.
One issue is that operators are able to do more with less as data compression technologies improve, she said. Another issue that might deflate the value of spectrum is the level of competition from wireless technologies like EVDO, a third generation cellular network available from operators like Bell.
“I question the value of (spectrum) with the aggressive rollout of things like EVDO, Wi-Fi and wired broadband,” said Fox. “The need for more and more spectrum is questionable. I think (Look) may be disappointed and the potential revenue may not meet their expectations.”
Look Communications sought bankruptcy protection in 2002 and was losing as much as $10 million to $20 million a month during its roughest period, said McGoey. It since shed approximately 500 of its workforce and is now operating with 100 employees on a cash flow positive basis.