Wireless competition more elusive as Verizon stays out of Canada

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Verizon Communications Inc. is ruling out expansion into Canada in the wake of its $130-billion (U.S.) deal to take full control of its wireless arm, eliminating Ottawa's best hope of attracting a new wireless carrier to compete with the country's three incumbents.

After months of exploratory talks about a potential northern expansion, Verizon said it has no intention of entering Canada, removing a deep-pocketed bidder just two weeks before Ottawa kicks off the spectrum-auction process for new wireless services. That leaves the Conservative government's overarching goal for the wireless market – creating a fourth viable competitor in every region of the country – out of reach for now.

Hours after announcing a blockbuster deal to purchase Vodafone Group PLC's 45-per-cent stake in joint venture Verizon Wireless, Verizon said it is backing away from this country's wireless market. "Verizon is not going to Canada," chief executive officer Lowell McAdam told Bloomberg News in a telephone interview. But he said that Verizon's new position on Canada was unrelated to its long-awaited buyout of Vodafone, and that discussion of the company's interest in Canada was "way overblown."

Spokesman Bob Varettoni later verified the company's decision. "I can confirm that [Mr. McAdam] said at this point in time, Verizon does not have an interest in entering the Canadian wireless market," he said in an e-mail to The Globe and Mail.

For its part, the federal government said the auction is going ahead as planned. "The rules for the upcoming spectrum auction were designed, well in advance, to create the right conditions so that consumers benefit. The result of the auction will be positive for Canadian consumers, regardless of outcome, because the rules were designed with their interests up front," said Jessica Fletcher, spokeswoman for Industry Minister James Moore, in an e-mailed statement.

Initially, Verizon looked at buying one or both of Canada's two small and struggling wireless upstarts, Wind Mobile and Mobilicity, and then take part in the January, 2014 auction of the most valuable wireless licences ever to be sold in this country. In August, it changed course, with sources saying it would first bid for licences before looking at potential deals.

The prospect of Verizon's Canadian entry sparked intense debate in the telecommunications industry, with the big three Canadian carriers, Rogers Communications Inc., BCE Inc. and Telus Corp., all strenuously opposing what they described as loopholes in federal policy that would give the massive U.S. firm unfair competitive advantages. Despite Verizon's declaration that it is not interested in a Canadian expansion, the country's three big telcos say they will continue to press Ottawa to rewrite policy to remove those inducements.

In June, Verizon tabled a preliminary $700-million (Canadian) offer for Wind and signed a non-disclosure agreement with Mobilicity as part of early stage takeover talks with the struggling start-up carriers, according to sources familiar with the discussions. Those moves followed a pivotal meeting between Verizon and Industry Canada in late May about potential wireless opportunities.

Ottawa rejected a $380-million takeover offer of Mobilicity by Telus in June, leaving the smaller carrier with limited options.

In July, Verizon's chief financial officer, Fran Shammo, confirmed the U.S. telco was looking at Canada, adding there was good potential in Ontario and Quebec, but that the regulatory environment and federal policies regarding foreign investment could be stumbling blocks.

Canadian incumbents said Monday they would keep up their fight to get Ottawa to change its wireless rules.

Telus's chief corporate officer, Josh Blair, said that Verizon's decision to forgo expansion into the Canadian market is "not at all" a relief, saying his company remains deeply concerned with Ottawa's plans to forge ahead with a spectrum auction that critics say will hand foreign players an unfair advantage. "So for the good of all Canadians, especially rural Canadians, we need to see the spectrum rules changed."

Rogers spokesperson Terrie Tweddle echoed Mr. Blair's sentiments, emphasizing that while the company welcomes competition, it remains concerned about spectrum-auction rules deemed by the big three to be inherently flawed and biased to new entrants.

In an e-mailed statement, BCE spokesman Mark Langton said, "It's significant news, but the regulatory loopholes that give advantages to big foreign carriers remain and should be closed. Canadians have said they want competition, but only if it's fair competition." (BCE owns a 15-per-cent stake in The Globe and Mail.)

Without a willing buyer in Verizon, the futures of the two struggling smaller players, Wind Mobile and Mobilicity, are mired in doubt. It remains unclear whether Wind and Mobilicity will have the financial wherewithal to bid in the auction. Wind's foreign financial backers have already said they are exploring options including disposing of the Toronto-based carrier. Even so, Wind chief executive Anthony Lacavera said in an e-mail Monday he remains optimistic about the company's prospects, adding that he commends the government's "unflinching commitment to consumers by holding the course on the wireless competition policy."

With a report from Bloomberg News