Rogers designs plan to thwart Verizon move into Canada

Fri Aug 2, 2013 6:06pm EDT
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By Alastair Sharp and Euan Rocha

TORONTO (Reuters) - Rogers Communications Inc, Canada's largest wireless company, is attempting to thwart Verizon Communications Inc's entry into the country by backing a private equity bid for two small carriers that the U.S. telecom giant wants to acquire.

According to sources familiar with the deal, Rogers wants to help Toronto-based Birch Hill Equity Partners fund a purchase of controlling stakes in Wind Mobile and Mobilicity, which entered the Canadian market less than five years ago.

The plan would complicate a Verizon bid, perhaps pushing the company to raise its offer price, but industry insiders say that is far from assured Rogers and Birch Hill would win approval from the federal government.

Ottawa has repeatedly stressed that it wants to boost competition and lower wireless bills for consumers, and it has set rules in recent auctions of wireless airwaves designed to encourage new carriers to offer services.

Rogers - along with Canada's other major national telecoms BCE Inc and Telus Corp - argue that Verizon would unfairly benefit from the policies to stimulate competition. Those policies include a 2012 easing of restrictions on foreign ownership for smaller operators.

In keeping with its goals, Ottawa has opposed efforts by the Big Three to win control of airwaves owned by any recent entrants, and government policy prevents Rogers from making a direct big for Wind or Mobilicity.

Rogers, Telus and BCE's Bell currently control 90 percent of the market and 85 percent of the spectrum.

The Rogers-Birch Hill plan, initially reported by the Globe and Mail newspaper on Friday, is designed to circumvent those restrictions. The company would take no ownership in Wind and Mobilicity and would not control spectrum owned by them. Instead, the deal is structured to give Rogers access to the airwaves through a commercial agreement.   Continued...

A Blackberry smartphone on the Rogers wireless network is seen in Montreal, October 26, 2010. REUTERS/Shaun Best