August 15, 2013 / 6:24 PM / in 4 years

Canadian telecom stocks rise as Verizon said to delay entry

TORONTO (Reuters) - Shares in two of Canada’s biggest wireless telephone companies rose roughly 5 percent on Thursday as doubts emerged about whether U.S. giant Verizon Communications (VZ.N) still plans to expand across its northern border.

Rogers Communications (RCIb.TO), the Canada market leader with some 9 million wireless customers, and Telus Corp (T.TO), which has more than 7 million, gained sharply while the third major operator, BCE Inc (BCE.TO), rose 1.8 percent by mid-afternoon.

Sources told Reuters in June that Verizon had offered between $600 million and $800 million for wireless newcomer Wind Mobile and was also in talks with another struggling upstart, Mobilicity.

But the Globe and Mail newspaper reported late on Wednesday that Verizon now planned to focus on an auction of coveted wireless airwaves due early next year before deciding whether to proceed with the acquisitions.

Verizon, Wind and Mobilicity declined comment on Thursday.

Desjardins analyst Maher Yaghi said the report of a delay could mean either that Verizon wants to see how much the airwaves cost before it commits to buying the companies - possibly extracting a better price - or that an established operator has offered them a compelling deal on roaming rates, making the company reconsider its entire interest in Canada.

“The new development lessens the odds of Verizon entering Canada; however, it does not eliminate this possibility completely,” he said in a note to clients in which he pointed to 20 percent upside for Rogers, Telus and BCE if Verizon does not enter Canada and up to 25 percent downside if they do.

RBC Capital Markets analyst Drew McReynolds said investors were, as of Wednesday’s closing stock prices for the main players, assuming a 60 to 70 percent chance that Verizon comes.

The auction for 700 MHz spectrum is due to start in January, with a deadline to express interest next month.

The auction is expected to raise billions for a federal government that has actively encouraged involvement from new entrants, including Verizon, as a way to stoke competition.

The possible Verizon delay could exert pressure on the sellers of Wind and Mobilicity to agree to a lower price, and on the government to maintain or even improve the regulatory framework, a source involved in the process said.

The established operators have mounted a massive campaign against those rules, which they say unduly benefit Verizon and other foreign companies that dwarf them.

Telus was trading $1.53 higher on the day at C$32.28, Rogers was up C$1.84 at C$42.27, and BCE gained 76 Canadian cents to C$42.54 on the Toronto Stock Exchange.

Reporting by Alastair Sharp; Editing by Nick Zieminski

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