Canada’s incumbent wireless companies knew the rules about a fourth player entering the market, and won’t be successful in changing them ahead of Verizon’s potential entry into the Canadian market, says one analyst.
Neeraj Monga, Executive VP and Head of Research for Veritas Investment Research was on BNN’s “Business Day” yesterday to talk about the hot topic of the U.S. wireless giant entering the Canadian market.
Monga’s appearance came as Canada’s big three incumbent wireless players, Bell, Rogers, and Telus, were intensely lobbying the government and Canadian public, arguing that they are at a disadvantage because current rules allow a new entrant to buy smaller Canadian carriers, buy more wireless spectrum than they can, and to piggyback on their wireless spectrum, rather than building their own.
“A company of this scale certainly doesn’t need handouts from Canadians or special regulatory advantages over Canadian companies,” said BCE CEO George Cope in an open letter. “But that is exactly what they get in the new federal wireless regulations.”
Telus CEO Darren Entwistle warned of a “bloodbath” if Verizon is allowed to enter the Canadian market.
“…it’s going to be prohibitively expensive and suck a lot of money out of the industry,” he told the Financial Post. “Money that won’t go to infrastructure and technology, money that won’t go into rural coverage or support lower prices.”
Monga says these concerns are now coming to the fore now because this is the first time the incumbents have seen a strong competitor like Verizon consider entering the market. He thinks there is little chance the Canadian government will change the rules that the “big three” are describing as loopholes.
“I do not consider these rules in place to be loopholes,” says Monga. “The government had mandated that it has a policy of promoting a fourth wireless carrier in every province of Canada. One could argue whether that policy was correct or not, but the fact that the governemnt has a policy, it has created a framework in which all new player and entrants are supposed to play. And this policy has been in place for more than a year now, and all the rules that are being bandied about or talked about as loopholes right now, they have existed, and the incumbents have known about these rules.”
Monga says the incumbents are right to be concerned that Verizon would be a threat to their business. The analyst says Verizon is a very large and very successful company, and telecom markets the world over have become increasingly globalized in their ownership. He thinks there is a 75% chance Verizon will come to Canada.
“This is one of the positive outcomes of a policy that was meant to promote competition,” he says.