The federal Competition Bureau has approved the purchase of Toronto-based wireless telecom services provider Public Mobile Inc by Telus Corp (TSX: T). The undisclosed acquisition deal was announced in October, and will provide exits to Thomvest Seed Capital and Cartesian Capital, which bought Public Mobile from other private equity and venture capital firms, including OMERS Private Equity, earlier this year. In its ruling, the Bureau concluded that “the proposed transaction is unlikely to lead to a substantial lessening or prevention of competition” in affected areas of operation.
(ThomVest is the private equity arm of Peter Thomson, a director of Thomson Reuters, publisher of peHUB.)
Competition Bureau Statement Regarding The Proposed Acquisition by TELUS of Public Mobile
OTTAWA, November 29, 2013 — This statement summarizes the approach taken by the Competition Bureau in its review of the proposed acquisition by TELUS Communications Inc. (TELUS) of Public Mobile Holdings Inc. and its operating subsidiary, Public Mobile Inc. (Public Mobile), pursuant to an agreement announced on October 23, 2013.
On November 28, 2013, the Bureau issued a No Action Letter (NAL) to TELUS and Public Mobile indicating that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed transaction.1 In conducting its investigation, the Bureau reviewed information obtained from TELUS and Public Mobile, including strategic documents, business plans and customer switching data, as well as information obtained from market participants pursuant to this and other recent Bureau reviews related to wireless telecommunications.
The proposed transaction is a merger between two providers of mobile wireless telecommunications services. Canada’s mobile wireless telecommunications industry is highly concentrated, with the vast majority of wireless subscribers served by three national incumbent providers: Rogers Communications Inc. (Rogers), which operates under the Rogers Wireless, Fido Solutions and Chatr Wireless brands; BCE Inc. (Bell), which operates under the Bell Mobility and Virgin Mobile brands; and TELUS, which operates under the TELUS Mobility and Koodo brands. The industry is characterized by very high barriers to entry and expansion; the ready availability to market participants of information regarding prices, rival firms and market conditions; and the existence of joint ventures and industry organizations that could facilitate the communication and dissemination of information among market participants. As a result of these factors, mergers between wireless providers have the potential to not only substantially lessen or prevent competition through a unilateral exercise of market power, but to also facilitate the coordinated exercise of market power by market participants. Furthermore, even small increases in concentration in wireless markets may lead to a substantial prevention and/or lessening of competition.
As a result of these factors and the importance of wireless services to Canadians, the Bureau will continue to closely monitor the evolution of concentration and competition in Canada’s wireless telecommunications markets and take steps, as necessary, to protect consumers.
Through the TELUS Mobility and Koodo brands, TELUS’ national wireless network serves approximately 7.7 million wireless subscribers using a combination of third and fourth generation network technologies. Public Mobile operates a third generation wireless network that covers the Southern Ontario and Greater Montreal areas and serves approximately 280,000 subscribers. Public Mobile deployed its wireless network in the spring of 2010, following its acquisition of four spectrum licenses through Industry Canada’s 2008 auction of wireless spectrum.
Mobile wireless telecommunications services are differentiated products, with each provider offering a particular range of service plans that vary across a number of dimensions, including price, network quality (i.e. speed, reliability and coverage), device selection and contract terms. Information obtained from the parties and third parties reveals that TELUS’ Koodo brand and Public Mobile target the “value conscious” segment of the continuum of mobile wireless customers. In other words, they are rivals in respect of mobile wireless users who generally value affordability more than other features, including device selection, network speed and scope, and intensive data usage.
The coverage areas of the TELUS/Koodo and Public Mobile wireless networks overlap in two geographic areas: Southern Ontario and Greater Montreal. The Bureau’s review therefore focused on determining whether the proposed transaction is likely to substantially lessen competition in each of these areas through the elimination of a rival (i.e., Public Mobile).
In both Southern Ontario and Greater Montreal, the parties compete against Rogers and Bell, and their respective brands. Notably, they also face competition from recent entrants, including WIND Mobile in Southern Ontario and Videotron Mobile in Greater Montreal.
As part of its investigation, the Bureau reviewed documentary evidence regarding the market entry that occurred in 2010 following Industry Canada’s auction of spectrum on the AWS and PCS bands in 2008 (e.g., entry by WIND Mobile, Public Mobile, Mobilicity, and Videotron Mobile). This documentary evidence suggests that the incumbent wireless providers (i.e., Rogers, Bell and TELUS) responded to entry by lowering prices; accelerating the introduction of new products, plans and services; and expanding the overall range and diversity of wireless products, plans and services available to customers in the geographic areas that experienced new entry.
Given this evidence, the extent to which there would remain effective non-incumbent competition in each of Southern Ontario and Greater Montreal post-transaction was an important consideration in the Bureau’s investigation of this matter. As a result, the Bureau focused its analysis on the degree to which WIND Mobile and Mobilicity (in Southern Ontario) and Videotron Mobile (in Greater Montreal) are likely to provide such competition.
In evaluating the extent of effective remaining competition in Southern Ontario and Greater Montreal, the Bureau considered information obtained from the parties and third parties through market contacts, strategic documents and business plans, including customer switching data.
As part of its review, the Bureau learned that Public Mobile was going to discontinue its $19/month “Unlimited Talk” plan due to financial sustainability issues. The Commissioner was concerned that the proposed transaction could accelerate the timing of the elimination of the plan. In the course of the Bureau’s review, TELUS advised the Commissioner that it intends to continue to offer a $19/month “Unlimited Talk” plan on substantially the same terms as Public Mobile’s current $19/month “Unlimited Talk” plan until at least December 31, 2014.
The Bureau concluded that the proposed transaction is unlikely to lead to a substantial lessening or prevention of competition due to the existence of effective remaining competition in each of the geographic areas where the parties’ wireless networks overlap. Specifically, it is the Bureau’s view that the remaining non-incumbents in Southern Ontario and Greater Montreal, though differentiated from Public Mobile, are likely to continue to provide effective competition post-transaction. In deciding to issue a NAL, the Commissioner also considered, among other things, TELUS’ commitment described above in respect of a certain segment of the mobile wireless market and likely efficiencies from the proposed transaction.
The transfer of Public Mobile’s four spectrum licenses to TELUS pursuant to the proposed transaction was also subject to review by Industry Canada, which approved the license transfer on October 23, 2013.
The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
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1 Analytical methodologies are applied, and enforcement decisions are made, on a case-by-case basis. The methodologies and conclusions discussed in this statement are specific to the review of the transaction in question and are not binding on the Commissioner. The legal requirements of section 29 of the Competition Act, and the Bureau’s policies and practices regarding the treatment of confidential information, limit the Bureau’s ability to disclose information obtained during the course of a merger review. (back to footnote reference 1)
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