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 fourth wireless player'— Telecom analyst Dvai Ghose
"From Wind Mobile’s 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 Mobile remains firmly 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 said Wind'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 government’s plan to introduce competition in the telecom marketplace and lower prices for consumers.
Telecom watchers say that without Wind’s bid Ottawa has failed in its efforts to create a fourth player in the telecom market in Ontario, Alberta and British Columbia.
"It is now not at all clear who will buy the fourth prime block in Ontario, British Columbia and Alberta," telecom analyst Dvai Ghose 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 Wind — but poured cold water on those rumours last fall and formally said it had no plans to enter Canada.
Private equity firms such as Birch Hill Equity Partners and Catalyst Capital Group Inc. also made overtures to 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 Verizon’s decision not to enter Canada," Ghose said.
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 name Globalive 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., Wind’s main investor, told the government of its intention to withdraw from the 700 MHz spectrum auction earlier Monday.
"Wind Mobile’s shareholder VimpelCom decided not to fund Wind Mobile’s participation in this auction, but confirmed that it remains in discussions with the federal government and Wind Mobile’s other shareholder AAL Holding to 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 Ottawa’s foreign investment rules, which prevent it from taking full control of Wind.
Ottawa’s decision to block the sale of MTS Allstream to Egyptian billionaire Naguib Sawiris because of unspecified national security concerns also spooked VimpelCom.
In an interview with CBC's The Lang & O'Leary Exchange, Lacavera said 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 sending mixed messages about telecom.
"In many respects it’s even worse than 'we’re closed for business,' because at least ‘closed for business’ is definitive. This is ‘it’s uncertain, it’s unclear as to exactly what will rule the day’ and investors, as you know, hate uncertainty. We need a clear picture as to what’s going to be permitted and what’s 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 Vidéotron and EastLink in their home markets," Ghose said.
"Despite its intentions, it does not look as if the government will see a sustainable fourth wireless player in Ontario and Western Canada," Ghose said.