Wind Mobile buyout limited threat to Canada telcos, for now

Tue Sep 16, 2014 5:56pm EDT
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By Alastair Sharp and Euan Rocha

TORONTO (Reuters) - The sale of Wind Mobile to a group of private equity investors will need to be followed by hefty investment and further deals before Canada`s No. 4 wireless provider poses a significant threat to its much larger competitors.

Shares of BCE Inc, Telus Corp, and Rogers Communications Inc all fell slightly on Tuesday following the news, which some view as a first step to creation of a stronger challenger to the three dominant national players.

"It definitely makes consolidation more likely ... but it doesn't worry me as an investor in Bell, Telus or Rogers," said Ryan Bushell, a portfolio manager at Leon Frazer, which holds shares in the big telcos. "I don't think they can compete at the high-end of the market, which is where the margin is."

The deal announced on Tuesday replaces Amsterdam-based Vimpelcom - a majority equity owner who was unable to turn that into a controlling stake - with five private equity backers who sources say paid some C$300 million combined.

While the Canadian government will likely tout the deal as validation of its promise of four viable wireless players across the country, there was little indication the new backers have such lofty ambitions.

Wind Mobile founder Anthony Lacavera said the carrier - which operates in populous Ontario, British Columbia and Alberta - would now focus on improving service and had no big expansion plans.

"The business plan has evolved," he told Reuters. "There are already four carriers in all other Canadian markets, so we don't necessarily want to enter as a fifth carrier in any of those markets."

BCE, Rogers and Telus compete with Eastlink in the maritime provinces, with Quebecor Inc in Quebec, Manitoba Telecom Services in Manitoba, and Sasktel in Saskatchewan.   Continued...