Canada launches auction of prized 700 MHz airwaves – Reuters

(Reuters) – Canada kicked off an auction of prized wireless airwaves on Tuesday, but the last-minute withdrawal of main upstart Wind Mobile a day earlier suggests the country’s largest phone companies could obtain the limited resource more cheaply than previously thought.

The 700 MHz airwaves, which are being used in the United States to build high-speed networks, are valued for their ability to penetrate buildings and travel long distances.

Here are some facts about the auction:

The process divides Canada into 14 regions, with seven spectrum blocks in each. But four of those blocks are most coveted because they align with U.S. airwaves, meaning many of the latest devices already work on the frequency. Canada’s three largest operators – BCE Inc‘s Bell, Rogers Communications Inc, and Telus Corp – are allowed to acquire only one of these prime blocks each.

Industry Canada, the government body charged with running the auction, says it will not provide any information on bids until up to five days after the complicated process ends. Similarly constructed auctions elsewhere have recently taken between two and seven weeks.

A recent auction of similar frequencies in Australia raised A$2 billion ($1.8 billion), much less than anticipated, as some airwaves remained unsold.

Ottawa last March set minimum opening bids at C$897 million ($826 million). An auction of higher-frequency airwaves in 2008 brought in C$4.25 billion.

Bidders include Rogers, Bell and Telus, which together control about 90 percent of the Canadian wireless market. Established regional operators are also bidding, including Quebecor Inc‘s Videotron unit, Manitoba Telecom Services Inc and Saskatchewan Telecommunications, which is owned by its provincial government.

Also in the mix is Feenix Wireless Inc. Its owner, John Bitove, founded Canadian wireless startup Mobilicity, which is seeking a buyer while under creditor protection. (Mobilicity, a.k.a. Data & Audio-Visual Enterprises Wireless Inc, has been backed by U.S. private equity firm Quadrangle Capital Partners since 2008.)

Besides Wind Mobile parent Globalive, a string of other contenders also pulled out along the way, including private equity firms Birch Hill Equity Partners Management Inc and Catalyst Capital Group Inc, Mobilicity’s single largest debtholder.

Rounding out the list of still-standing bidders are Bragg Communications Inc, which serves the Maritime provinces under the Eastlink brand; metro Vancouver-focused Novus Wireless Inc; and TBayTel, which is owned by the city of Thunder Bay in Ontario.

While speculation was rife last summer that U.S.-based Verizon Communications was planning to enter the much smaller Canadian market, that threat to existing players has not materialized.

Verizon, or another deep-pocketed foreign operator, is restricted by law from acquiring BCE, Rogers or Telus, but could still target a smaller operator such as Wind or Mobilicity.

Canaccord Genuity analyst Dvai Ghose had estimated each of the four most prized blocks could have brought in C$500 million for the government, but after Wind’s withdrawal said the overall haul would probably fall below his initial C$2.5 billion ($2.3 billion) forecast.

($1 = 1.1043 Australian dollars)

($1 = 1.0866 Canadian dollars) (Reporting by Alastair Sharp; Editing by Lisa Von Ahn)

(Additional editing of story by Kirk Falconer, Editor, peHUB Canada)

Photo courtesy of Shutterstock