September 9, 2010 / 3:17 PM / in 7 years

Quebecor joins Canada's wireless fray

TORONTO (Reuters) - Quebecor’s Videotron cable arm launched 3G wireless service on Thursday, a move likely to pressure prices in an increasingly congested Canadian market.

<p>Videotron Ltee Chief Executive Robert Depatie holds a mobile phone at a news conference to launch the company's wireless network in Montreal, September 9, 2010. REUTERS/Shaun Best</p>

The market is dominated by phone companies Telus and BCE’s Bell Canada unit, and by cable and telecom company Rogers Communications, though a number of new entrants are encroaching.

Videotron’s offering, initially limited to Montreal and Quebec City and the areas in between those cities, will directly challenge Bell, the established incumbent, as an integrated provider -- offering cable television, broadband Internet, landline and now mobile telephony.

“This new service that we are launching will benefit all Quebeckers, be they entrepreneurs, creative types, television watchers, fans of culture and entertainment, or those who just want to be unplugged,” Videotron Chief Executive Robert Depatie said at a news conference in Montreal.

Videotron is widely seen as one of the most formidable of the new wireless providers, as it can bundle its existing services including French-language broadcast content.

Depatie told Reuters that 1.25 million households subscribe to at least two Videotron products and he expects many of them, more than 2.5 million individuals, to add mobile.

He did not provide more detailed forecasts on subscriber numbers, citing company policy.

But the price plans of the long-expected launch, particularly the absence of an unlimited data plan, lessens the likelihood of a spiraling price war, analysts say.

“The service is clearly targeted to grow and enhance Videotron’s bundled offerings and price plans are competitive but not as disruptive as some have feared, particularly with respect to data pricing,” BMO Capital Markets analyst Tim Casey said.

Videotron plans to expand the service to other provincial centers as well as the Canadian capital city of Ottawa, which is in Ontario on the Quebec border, by April 2011 to reach 82 percent of the province’s population.

Quebecor has estimated it will spend between C$800 million ($777 million) and C$1 billion and hire more than 600 employees for the network. [ID:nN20149719] It paid C$554.5 million for spectrum in a 2008 government auction.

Videotron will offer 12 handsets at launch, headlined by the Google Android-based Nexus One phone from HTC but noticeably not including an Apple iPhone.

“We would love to offer our customers iPhone -- obviously it’s a phone people want,” Depatie said, adding that the suite of Android-based phones on offer “will do the job.”

For roaming coverage outside of the province, Videotron will partner with Rogers in Canada and T-Mobile, a division of Deutsche Telekom, in the United States.

Videotron was the first major Canadian cable company to offer residential landline telephone service via cable, in 2005.

Aggressive pricing has since won it a third of Quebec’s home phone market, and analysts predict more gains to come.

“We see this as a substantial opportunity for Quebecor, with bundling opportunities and regional calling patterns on its side as it attacks the unlimited talk and text marketplace,” Northland Capital Partners analyst Rob Goff said ahead of the launch.

“Videotron’s fiber-optic network can handle huge quantities of information at an affordable cost,” he added.

Quebecor’s shares were down 0.9 percent by early afternoon, valuing the company at C$2.27 billion.

Alberta-based cable and telecom company Shaw Communications also bought wireless spectrum in the 2008 auction and plans to launch a network late in 2011.

Rogers Communications on Wednesday said it would launch its discount text- and talk-only service, called chatr, in Montreal on September 16. The service has been rolled out in Vancouver, Calgary, Edmonton, Toronto and Ottawa.

($1=$1.03 Canadian)

Additional reporting by Julie Gordon; editing by Peter Galloway

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