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Quebecor ‘ready, willing and able’ for wireless expansion: CEO

Quebecor CEO Pierre Dion

CHRISTINNE MUSCHI/REUTERS

Quebecor Inc. gave its strongest hint yet that it will expand its wireless business across Canada, but the company's chief executive once again sent a pointed message to Ottawa on the urgency of creating "a level playing field."

Pierre Dion, who took over as CEO at the Montreal-based telecommunications and media company in April, said Quebecor is "ready, willing and able" to take on Canada's Big Three national wireless providers with a low-cost offering, but not without assurances from the federal government that domestic roaming rates will be "fair."

He also said the company is considering a consolidation with "one or two of the undercapitalized new wireless entrants."

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The wholesale rates regional carriers pay to roam on their larger competitors' networks when their customers are outside their own area of coverage have become a central focus of Quebecor's decision-making process.

"The major investments we have made and intend to make in spectrum, expanded network and consolidation with willing partners would enable us to deliver genuinely competitive, low-cost, high-quality wireless services to consumers," Mr. Dion told an audience at an industry conference in Toronto. "However, to succeed, things need to change."

He said the high rates the country's incumbents – BCE Inc., Rogers Communications Inc. and Telus Corp. – charge for roaming on their networks has been the primary barrier to new entrants.

"If this barrier can be brought into line on a competitive level playing field that is fair to all service providers, we will be standing at the dawn of a new era of wireless competition and expansion in Canada," he said.

The Big Three warn that mandating ultra-cheap wholesale access to their networks provides a disincentive to investment, allowing small carriers to piggyback on their extensive national infrastructure.

Mr. Dion insisted Wednesday that Quebecor's wireless division Vidéotron Télécom Ltée would invest in its own networks, noting the company has already spent $1.6-billion on spectrum and networks.

In this year's public spectrum auction, Vidéotron spent $233-million on licences for cellular airwaves in Quebec as well as Ontario, British Columbia and Alberta, stirring up speculation it would take its mobile business national.

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Former CEO Robert Dépatie and his successor Mr. Dion have since been non-committal on expansion calling it one possibility, under the "right conditions," and noting the company might decide to simply sit on the spectrum.

Some analysts have questioned whether expansion is realistic, citing high capital costs and technology constraints related to the type of spectrum Vidéotron won. But Barclays Capital analyst Phillip Huang highlighted an increased chance of expansion in a report this week, saying he believed conversations between the company and Ottawa have been friendlier than expected.

That could be due in part to Quebecor's move to name former prime minister Brian Mulroney, a committed federalist, as new chairman of its board. Mr. Mulroney will be formally voted in as chairman at Quebecor's annual general meeting in Montreal on Thursday, further distancing the company from its controlling shareholder, Pierre Karl Péladeau, who now represents the Parti Québecois as a member of the Quebec legislative assembly.

"Quebecor seems more serious [about expansion] than they were before, but only if they get the right roaming conditions," said Jeff Fan, an analyst with Scotia Capital Inc., in an interview. "They're keeping the perspective that they have shareholders and bondholders to look after and are not just going to risk everything."

Mr. Dion said Wednesday consolidation with one or more new entrants could almost triple Vidéotron's wireless customer base, which surpassed 500,000 earlier this year. Wind Mobile said Tuesday it now has 735,000 subscribers while Mobilicity, which is under creditor protection, has less than 200,000.

Mr. Fan noted that the Quebecor CEO also referred to "consolidation with willing partners" and said that could refer to some sort of share arrangement with Wind Mobile's foreign owner VimpelCom Ltd., which said in May it would consider selling Wind or swapping it "for a stake in a larger operator working in the country."

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The Canadian Radio-television and Telecommunications Commission has been investigating wholesale roaming rates since last year and plans to hold public hearings this fall. In the meantime, the federal government has introduced legislation to cap wholesale roaming rates at no more than what the carriers charge on a retail basis, a move intended to act as an interim measure while the CRTC conducts its review. The bill is presently before the Senate.

Multinational provider Orange S.A. said in a May filing as part of the CRTC's review that it is evaluating the Canadian market and could consider operating as a competitor at the retail level if wholesale roaming rates make the opportunity attractive.

Pierre Blouin, chief executive officer of Manitoba Telecom Services Inc., also spoke at the conference Wednesday, warning that Ottawa's efforts to support wireless competition on a national level could inadvertently disadvantage regional players such as his company.

While mandated roaming is intended to support small players as they build out larger networks, Mr. Blouin noted that the national incumbents themselves could take advantage of low set rates to roam on MTS's network in rural Manitoba at a significant cost advantage.

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About the Author
Telecom Reporter

Christine Dobby covers the Canadian telecom industry for The Globe and Mail. Before joining the Globe in May 2014 she reported for the Financial Post for three years, most recently writing about telecom and media. She has also reported for the Toronto Star and New Brunswick Telegraph-Journal. More

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