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Telus seeks licensing edge to build new 4g network

Telus has a history of rewarding shareholders with dividend growth, according to Yield Hog panelist Tony Demarin of BCV Asset Management.

SHAUN BEST/Shaun Best/Reuters

Telus Corp is using its pledge to build a new, faster mobile broadband network as a bargaining chip to influence public policy.

The Vancouver-based carrier - like its rivals both large and small - is seeking advantages in an upcoming wireless-licence auction.

Telus intends to build an advanced Long Term Evolution, or LTE, network across urban Canada, which would allow faster download speeds for mobile devices. The company is hinting, however, that it won't extend that network into rural and remote areas unless the rules for the 2012 auction enable it to obtain the airwaves it needs.

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The issue is contentious because the licences are so valuable: They're for the 700 megahertz frequency, a type of wireless signal that travels farther and penetrates buildings more easily than other frequencies. That makes it less expensive to build a wireless network over vast, remote areas because fewer cellular towers are required. It is also ideal for congested urban areas with lots of high-rises, where providers face heavy demand from mobile devices such as tablet computers.

"In deploying to rural areas, we have a lot of credibility," said Telus chief financial officer Bob McFarlane. However, he added, with LTE wireless technology, "our rural build is contingent on getting that spectrum."

In 2008, the Conservative government set aside licences for new players, preventing the well-capitalized wireless incumbents from outbidding would-be rivals. Telus doesn't want newcomers to have those advantages this time around. Telus is particularly annoyed that entrenched cable rivals - including Shaw Communications Inc. and Quebecor Inc.'s Vidéotron Ltée - obtained subsidized licences at the last auction.

"From a public-policy perspective, should one be subsidizing cable companies?" asks Mr. McFarlane. "And if you're subsidizing cable companies to get into wireless, why not subsidize wireless companies to get into cable? I think you should subsidize neither and let the market prevail."

However, newcomers such as Wind Mobile argue that Bell, Telus and Rogers are already "spectrum squatting" on wireless licences they've accumulated over the years. In particular, they point to a report by the SeaBoard Group telecom consultancy that found Canadian incumbents have much more wireless spectrum per subscriber than their global telecom peers.

"The new spectrum should be allocated to the new wireless companies that have already made a significant difference in the marketplace in urban Canada," the report says, noting that although prices have come down and the industry is more competitive, these gains are largely restricted to urban areas. "The new spectrum will allow the new companies to make the same compelling propositions available to more Canadians."

Critics argue that preferential rules are necessary because the wireless industry has been dominated by three extremely profitable players for years. "These guys are unbelievable," says Anthony Lacavera, chairman of Wind Mobile, which wants to build cost-effective networks in less-populated areas. "The incumbents are playing games again, to try and angle for a better competitive position."

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Bell and Telus are also both arguing to Industry Canada that building in rural areas within a specified period should be a requirement of obtaining a licence. Shaw still has not used licences it bought in 2008, Mr. McFarlane says, suggesting the rules should require that new spectrum must be used within three years of purchase.

That requirement would be more difficult for new entrants, however, since they have had problems finding funding, compared with well-capitalized companies such as Telus.

BCE Inc. and Rogers Communications Inc. have both announced that they are conducting technical trials of LTE technology.

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