Canadian carriers, CEOs oppose potential Verizon entry into wireless market

A group of 150 leading Canadian CEOs as well as executives from Canada's three largest wireless carriers have in recent days expressed strong opposition to Canadian government regulations and rules that could pave the way for Verizon Communications (NYSE:VZ) to enter the Canadian wireless market.

According to the Globe and Mail, the Canadian Council of Chief Executives sent a letter to Prime Minister Stephen Harper late last week asking him to reconsider rules that the council's president, John Manley, said would give Verizon a preferential right to buy wireless spectrum.

"Your government has clearly indicated its desire for increased competition in the telecommunications sector," Manley wrote in the letter to Harper. "While we as a council support that objective, we also believe that public policy should not discriminate against Canadian companies in favor of large foreign operators."

Telus, BCE's Bell Mobility and Rogers Communications have recently launched a public relations blitz aimed at persuading the government to close what they call loopholes that they say were designed to help small wireless players, not large companies like Verizon.

Canada's government last year relaxed restrictions on foreign ownership in small telecom companies with market share of 10 percent or less, in the hopes of increasing competition for incumbent carriers. And late last month, Canada's government, under the auspices of the Minister of Industry Christian Paradis, released new rules that will require all spectrum transfer requests to be reviewed. Further, "those that would result in undue spectrum concentration--and therefore diminish competition--will not be permitted," the government said. "Decisions on transfer requests will be made on a case-by-case basis and will be issued publicly to increase transparency."

"There is no level playing field here," Manley told the Globe and Mail. Manley sits on Telus' board and Telus CEO Darren Entwistle is also a member of the Council of Chief Executives' board.

Bell Mobility recently took out a two-page advertisement in major newspapers against the action, and top executives at Rogers and Telus expressed their opposition to Verizon's potential entrance in the market in media interviews and on calls with financial analysts.

During Verizon's second-quarter earnings conference call, Verizon Communications CFO Fran Shammo said that Verizon is interested in exploring options to enter the Canadian wireless market, but he stressed that it is "really an exploratory exercise for us." He said most of Canada's population is between Toronto and Quebec, and that aligns with Verizon's coverage. He also said Canada's 700 MHz spectrum auction, set for January, will auction off licenses that align with Verizon's own 700 MHz holdings.

Verizon reportedly made an initial offer of somewhere between $600 million and $800 million to buy fledgling Canadian wireless carrier Wind Mobile. Reports have also indicated that Verizon is in talks with rival wireless startup Mobilicity over a possible deal.

Telus, Bell Mobility and Rogers Communications dominate around 90 percent of the market in Canada, and the 2008 AWS spectrum auction did little to break their hold on the market. Telus tried to buy Mobilicity earlier this year for around $363 million but the deal was blocked by the government.

Some see the Canadian carriers' response as scare tactics. "They're trying to use the bogeyman of a U.S. company to scare Canadians into supporting a change to [current wireless] rules and really kind of push the government to doing an about-face on their policies," Steve Anderson, founder of OpenMedia, an advocacy group for affordable wireless access, told CBC News.

For more:
- see this Globe and Mail article
- see this CBC News article

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