Canadian Telecom Firms Make it Big in Wireless Spectrum - Analyst Blog

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Leading Canadian telecom service provider TELUS Corporation TU has stolen the show in Canada's latest wireless spectrum auction. It paid for the lion's share of the spectrum value, shelling out C$478.82 million for 122 licenses in the 2.5 GHz band. The recently acquired spectrum will complement TELUS' existing low band spectrum, which has better penetration and also travels afar in rural areas.

This was the second auction of the year, after the AWS-3 auction in March that had attracted $2.11 billion through a sealed bid procedure. Altogether, 50MHz of spectrum was offered in the prior auction of which 30MHz was reserved for newcomers in the wireless space. In the auction, TELUS had purchased 15 MHz of AWS-3 spectrum for $1.5 billion.

The latest auction has enabled the Canadian government to raise C$755.37 million from the sale of 2.5 GHz airwaves that are used for smartphones and other mobile devices. Nine companies acquired spectrum licenses in the auction. In total, the Canadian government sold 302 of the 318 regional licenses it had on hand. Most importantly, the auction fittingly attained its purpose of placing more spectrums in the hands of Canada's smaller companies and regional operators.

Notably, the second largest bidder was Videotron Ltd., which paid C$186.93 million for 18 licenses. These will help the company to expand its network outside its home base of Quebec to the cities of Toronto, Vancouver and Calgary.

Further, Canada's largest provider of Internet services in rural areas - Xplornet - paid C$25.44 million for 42 licenses. The company can use the airwaves to extend its broadband service to homes and businesses in areas that cannot readily be reached through conventional service using wires. Moreover, the spectrum win adequately supports the company's growth plans as it aims to deliver broadband Internet access to the entire rural population by 2017.

Other small regional buyers include Eastlink Wireless, Corridor Communications, TBayTel and Manitoba Telecom Services, who spent less than C$5 million to pick up spectrum.

In addition, Bell Mobility, a division of BCE Inc. BCE also acquired 51 licenses for C$28.99 million. With this, the company hopes to supplement its existing holdings of airwaves to facilitate advancement of its ongoing rollout of 4G LTE mobile services to consumers and businesses in urban and rural markets across Canada.

Last but not least, Canada's largest cable MSO and wireless operator Rogers Communications RCI also took part in the auction and bought 41 licenses for C$24.09 million. Notably, in 2012, rival Shaw Communications SJR had sold its wireless spectrum to Rogers and had decided against entering the Canadian wireless market.

However, as expected, both Bell Mobility and Rogers capacity to bid was restricted as both companies are at or close to their maximum permissible spectrum caps of 40 MHz in each service area, in most of the larger markets.

We believe that the additional spectrum with the regional providers will help them to effectively serve people living in the rural parts of Canada. The additional spectrum not only improves the service providers' market share but also boosts top-line growth going forward.

Currently, both TELUS and BCE carry a Zacks Rank #2 (Buy) while Rogers carries a Zacks Rank #3 (Hold). On the other hand, Shaw Communications has a Zacks Rank #5 (Strong Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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