UPDATE 1-Canadian telecom shares climb after Wind leaves wireless auction

Tue Jan 14, 2014 3:20pm EST
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By Alastair Sharp

TORONTO Jan 14 (Reuters) - Shares of Canada's top telecom providers, BCE Inc, Rogers Communications Inc and Telus Corp, all climbed on Tuesday after Globalive's Wind Mobile withdrew from a major auction of wireless spectrum.

The move all but assures that the three players will take the lion's share of the prized spectrum at a lower price than they might have otherwise expected to pay.

But the gains were tempered by concerns among some investors that Canada's Conservative government, which has pushed to increase competition in the wireless space, could respond with more stringent regulation of the industry.

The Conservative government has pitched itself to voters as fighting the dominant telecoms on their behalf to lower prices and improve service.

Globalive's decision to bail out of the auction dealt a double blow to the government, which was also hoping that strong proceeds from the auction would help it lower the budget deficit heading into next year's federal election.

There is now a strong chance of more regulation being drawn up, but Ottawa should tread carefully to avoid damaging the economy, said John Goldsmith, deputy head of equities at Montrusco Bolton, which owns shares in the Canadian telecom majors.

"If you force companies to cut pricing ... what ends up happening is you have companies invest less and fire more people," he said. "So you will have more of an unemployment problem, as companies try to keep margins where they are at."   Continued...