Rogers-Wind mega-deal won’t change status quo

Mobilicity, Shaw spectrum swapping will strengthen networks without major benefits to consumers.

mobilicity, spectrum auction, rogers-wind

Rogers-Wind Mega-Deal:

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Sometimes it’s the off-season that’s the most exciting time of year for sports fans. It’s dorky, but it’s also true for wireless industry watchers.

With the government’s spectrum auctions concluded for the foreseeable future, we’re in the heat of the wireless off-season now. Just as in sports, it’s time to watch those blockbuster trades and deals unfold.

The first such announcement came on Wednesday, with a four-way deal involving Rogers, Shaw, Wind and Mobilicity.

Rogers announced it was acquiring both Toronto-based Mobilicity and wireless spectrum from Calgary-based Shaw. In exchange for the government’s blessing on both deals, Rogers is divesting much of the spectrum from both companies to Wind.

All sides painted this as a big win for everyone. Here’s what the various parties say they’re getting.

  • Mobilicity creditors: Rogers is paying $440 million for the company, so Mobilicity’s long-suffering creditors will finally get something for their pain.
  • Mobilicity customers: Rogers says the upstart’s 150,000-or-so remaining customers will get continued service.
  • Shaw: The cable company finally gets to unload the spectrum it bought and has been sitting on since 2008. Shaw decided not to get into the wireless game, so it agreed to sell the spectrum to Rogers in 2013, but that deal has been in limbo with the government opposing such licenses going to the big wireless players.
  • Wind: The de facto fourth wireless player in Ontario, Alberta and British Columbia is getting 16 of Shaw’s 18 spectrum licenses and all 10 of Mobilicity’s licenses. Toronto-based Wind says that doubles its spectrum holdings and will allow it to roll out advanced Long Term Evolution (LTE) service sooner than expected. BC, AlbertaSaskatchewan, Manitoba and Northern Ontario and Eastern Ontario will particularly benefit, according to Rogers.
  • Rogers: In exchange, Rogers is getting some of Wind’s airwaves in Southern Ontario, which will allow the cable giant to provide “contiguous spectrum” in the region. The company is also strengthening its service in British Columbia and Alberta with the Shaw acquisitions. Rogers says the price it is ultimately paying for those licenses is considerably less than what they would have gone for at auction.
  • Consumers everywhere: The federal government is selling the deals as a bonus to consumers everywhere, since it furthers the official plan to have four strong carriers in every province.

With all that said, the blockbuster deal raises a number of questions – and invites several reality checks.

  • Mobilicity customers: The company’s remaining customers can assuredly look forward to big price hikes, similar to how Telus annihilated Public Mobile’s low-cost service upon taking over that company in 2013. If there’s any bright side, it’s that the very name Mobilicity – always a terrible brand – will likely be killed off by Rogers sooner rather than later.
  • Wind: Neither Rogers nor Wind has disclosed what sort of money is changing hands along with the spectrum, although sources close to the situation say the smaller company is paying “virtually nothing.” While any additional spectrum is good spectrum for Wind, the fact is that the extra AWS licenses aren’t likely to fix one of its big problems, which is its network signals penetrating through walls. Wind badly needs some of the 700 Mhz spectrum that was sold earlier this year – an auction it sat out because of financial problems – and this deal doesn’t do much in that regard. Without a network that can properly challenge Bell, Rogers and Telus, the company will continue to have only a minor effect on the market.
  • The government: Industry Canada is doing the hard sell on its approval on these deals as consistent with its pro-competition position, but it’s double talk at best. Industry Minister James Moore has in the past been adamant about not allowing any deals that would result in further “undue concentration” regarding spectrum, going so far as to twice reject Telus’s takeover offers for Mobilicity. Yet, on Wednesday, Moore was spinning the flip as providing more spectrum to newcomers such as Wind. That’s true, but it also provides the biggest spectrum owner – Rogers – with a lot more spectrum than it previously had. The before-and-after chart below shows a lot more purple, representing Wind, but also a lot more red, representing Rogers:
  • spectrum holdingsMoore also said the deal will finally put into use spectrum that has sat unused for nearly a decade (Shaw’s), which is rich given his previous threats to recall unused licenses. A spokesperson for the minister did not respond to a question on why the government has not followed through on those threats.

The taking out of Mobilicity, which has been a dead company walking for some time now, probably won’t mean much to the average consumer in the overall scheme of things. If anything, it removes a thorn in Wind’s side, potentially clearing the way for the company to charge its own customers more without fear of them going to an even cheaper competitor.

The status quo is thus likely to continue. A report commissioned by Industry Canada, released last week, shows prices are high and rising.

For a big shakeup to happen, the off-season wrangling is going to have to get more intense.

The real player to watch for the rest of this year is Montreal-based Quebecor, which has so far been sitting on the sidelines. The company owns chunks of the valuable spectrum around the country, including the good 700 MHz stuff.

Things will only get exciting if Quebecor decides to get involved in the wheeling and dealing.

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