Mysterious company heads up spectrum auction list

The process of introducing new cellphone companies to Canada got off to a surprising start on Friday with unknown Niagara Networks Inc. emerging as the most aggressive player so far.

By Peter Nowak — The process of introducing new cellphone companies to Canada got off to a surprising start on Friday with unknown Niagara Networks Inc. emerging as the most aggressive player so far.

The company led 30 applicants in jockeying for position for the federal government's upcoming auction of airwaves, scheduled to begin on May 27.

Niagara Networks is seeking 6,510 bid points — slices of spectrum licences — for various parts of the country, more than enough to launch a national cellphone network, requiring the company to make a credit deposit of $881 million with Industry Canada.

Niagara's application outdid the second largest, filed by the country's biggest cellphone provider, Rogers Communications Inc., which is looking for 4,030 wireless bid points with a required deposit of $534 million.

Douglas Evashkow, president of Niagara Networks, declined to comment on any details of the application. He would not say where the company's funding was coming from.

"It's tied into confidentiality agreements," he said. "But we're very excited to be a part of the auction and delivering those services. But that's about all I can give you. We have significant financial backing behind us."

Industry analysts were puzzled as well, but speculated that the funding may be coming in part from a foreign cellphone company such as Britain's Vodafone Group PLC or Germany's T-Mobile. The licences would be more than enough to start a full national cellphone provider.

"Somebody's got an appetite to be everywhere at once," said Iain Grant, president of telecommunications consultancy The SeaBoard Group.

The applications are not indicative of how companies will fare in the auction, analysts said, but do show the enthusiasm of the various players for getting into the lucrative $13 billion-plus cellphone business.

Industry Canada will examine all of the applications, perform credit checks and announce which ones qualify for the auction on March 31.

New entrants have an advantage in the auction because the country's three cellphone providers — Rogers, Bell Canada Inc. and Telus Corp. — are prohibited from bidding on 40 per cent of the airwaves being sold. The government announced that rule in November in an effort to encourage new carriers, and thus more competition through lower prices. The remaining 60 per cent of spectrum is open to bids from everyone.

The third-largest application came from Calgary-based Shaw Communications Inc. through a numbered company, for 3,076 bid points with a deposit of $400 million. Shaw earlier this week confirmed it had applied to bid, but said doing so did not necessarily mean it would build a cellphone network. The number of bid points Shaw is seeking is also more than enough for a full national network.

"The company plans to bid on licences as it deems appropriate, and cautions against speculation drawing direct correlation about its deposit and its ultimate intention regarding the possible purchase of licences," Shaw said in a statement Friday.

Shaw's statements have confused observers, who are unsure of the company's intentions. Shaw may be interested in building a national network, or it may want to simply sit on spectrum only to resell it a few years down the road, according to IDC Canada telecommunications analyst Lawrence Surtees.

MTS Allstream Inc. and Quebecor Inc. lodged the fourth- and fifth-most-aggressive applications, at $340 million and $317 million, respectively. Each company earlier this week confirmed its goal of launching a national cellphone provider, with MTS announcing it had formed a bidding consortium with the Canada Pension Plan Investment Board and New York-based private equity firm Blackstone Group LP.

Toronto-based Globalive Communications Inc. also surprised industry observers by announcing details of its application on Friday.

The privately held company, which sells telecommunications services under the Yak brand, said it was seeking 1,892 bid points  with a required deposit of $235 million, making it the sixth-most-aggressive seeker of spectrum so far. The company said it was receiving funding from Egypt-based Weather Investments, which runs cellphone providers in Italy and Greece, as well as London-based Novator, which operates carriers in Poland and Iceland.

Globalive chief executive Anthony Lacavera said Yak wants to become a national cellphone provider and isn't restricted by conservative shareholders, like most of the other bidders are. 

"We have at least as much financial clout as MTS or [Quebecor's] Videotron," he said. "In terms of free cash flow, we have significantly more available."

A company called Data & Audio-Visual Enterprises Wireless Inc. has also applied to bid for 972 bid points  with a deposit of $106 million. The company, known as "DAVE," shares an office in Toronto with XM Satellite Radio, which is owned by entrepreneur John Bitove. A spokesperson for XM would not comment on whether DAVE is tied to XM.

Bell and Telus also applied to bid for 1,500 bid points at $180 million and 1,860 bid points at $230 million, respectively.

Other $100-million-plus deposits placed belonged to an unknown numbered Canadian company, as well as a company called Triple Five Enterprises Inc.

A number of other smaller players also applied to bid, including Yellowknife-based SSI Micro Ltd. and Toronto-based Mipps Inc.

With files from the CBC's Paul Jay