No Welcome Mat for Verizon on Canada's Doorstep
"Get lost, eh!"
That's the message the Communications, Energy, and Paperworkers Union of Canada, the largest labor union north of the border, wants the Canadian government to give Verizon if it expects to get any advantages in buying Canadian wireless frequencies.
"Granting one of the biggest companies in the world special rights to public airwaves (spectrum), to buy small players and to existing companies' networks may be the most ill-conceived policy the Harper government has come up with," said CEP president David Coles in the union's press release.
And get this: Canadian telecom management is siding with the union, at least in this instance.
BCE's Bell Canada division, one of that country's three largest telecoms -- a group that also includes Rogers Communications and Telus -- has written an open letter to "all Canadians" decrying new regulations that put Canadian telecoms at a disadvantage when bidding for wireless spectrum.
"Verizon Communications, a $120-billion U.S. Telecommunications giant with 100 million wireless customers, is considering entering the Canadian market," wrote Bell Canada CEO George Cope. "A company of this scale certainly doesn't need handouts from Canadians or special regulatory advantages over Canadian companies. But that is exactly what they get in the new federal wireless regulations."
Telus CEO Darren Entwistle told the Financial Post earlier this month that the telecom industry in Canada would face a "bloodbath" unless all companies were able to bid for spectrum under the same rules.
Verizon's interest in moving into Canada was confirmed by its CFO, Fran Shammo, when he told The Wall Street Journal that his company was indeed "looking at the opportunity."
And last month, Reuters reported that Verizon had made a tentative bid of $600 million to $800 million for Canadian start-up Wind Mobile and was also having takeover talks with another Canadian mobile start-up, Mobilicity.
The problem for the larger Canadian telecoms is that there is a moratorium on letting incumbent telecoms obtain spectrum owned by those start-ups. Not having to bid against the incumbents for spectrum is a huge advantage for Verizon, something Verizon picked up on after the Canadian government blocked Telus' $380 million bid for Mobilicity in early June.
BCE, Rogers, and Telus have all seen their stock prices slump from 12% to 20% since their 2013 highs in May and April on the threat of having Verizon come north.
The Canadian government imposed the new spectrum-buying regulations as a way to show consumers that it will try to give them lower cell phone bills by bringing in strong competition to the current industry leaders.
With little likelihood of significant subscriber gains in its U.S. market through mergers and acquisitions -- the Federal Communications Commission and the Department of Justice made that quite clear with their treatment of the AT&T /T-Mobile USA merger proposal -- then the U.S. duopoly of telecom giants will have to look outside the good old US of A for a turbo boost.
But if Verizon and/or AT&T do travel north, they should expect a bitter cold welcome.
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The article No Welcome Mat for Verizon on Canada's Doorstep originally appeared on Fool.com.Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool recommends Rogers Communications. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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