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This article was published 4/6/2013 (2501 days ago), so information in it may no longer be current.
OTTAWA -- Ottawa is blocking a $380-million deal to sell struggling wireless-upstart Mobilicity to Telus Corp. and says it will continue to prohibit spectrum transfers that would limit competition in the Canadian wireless market.
Industry Minister Christian Paradis said Tuesday the government would use all tools at its disposal to ensure there are at least four wireless competitors in every region of Canada.
Telus and Mobilicity had sought an exception to a federal policy that prevents a transfer of spectrum from new, small carriers to the large incumbents for five years after licences are issued.
But Paradis' language suggests Telus would still have a high bar to clear to get permission to purchase Mobilicity's spectrum even after February 2014, when the initial limitation expires.
The telecom sector was up 0.2 per cent in afternoon trading on the Toronto Stock Exchange following the announcement, which was made before markets opened, while Telus shares rose 23 cents to $36.02.
Telus, which has warned in the past Mobilicity won't be able to survive without financial help, called the decision "unfortunate" for Mobilicity's 250,000 customers and 150 employees and debt-holders.
"(They) now face considerable uncertainty due to the pressing financial challenges facing the company," Telus said in a statement.
NDP critic Glenn Thibeault accused the government of creating a shambles in the sector, adding if Mobilicity went bankrupt, "consumers will be left holding the bag," along with the creditors.
But the minister said it was not a "foregone conclusion" Mobilicity will go bankrupt.
Mobilicity chief executive Stewart Lyons said he was reviewing the minister's decision and will "be speaking with Telus and other stakeholders and will have more to say in due course."
Wind Mobile CEO Anthony Lacavera said he'd consider buying Mobilicity.
"I think this opens up a new opportunity for discussion with Mobilicity," Lacavera said from Toronto.
Mobilicity's subscribers and network would give Wind Mobile more critical mass and its spectrum could be added to Wind's spectrum in the transition to a faster, next-generation network.
He also said VimpelCom, which had put Wind Mobile up for sale, may want to keep it now there's certainty on the rules from the federal government.
"I think the government made a very good move in providing the market with clarity on how spectrum transferability rules will be applied," he said.
The government has long sought to increase competition in the wireless sector that has been dominated by Bell (TSX:BCE), Rogers (TSX:RCI.B) and Telus (TSX:T). During a 2008 sale of additional spectrum, Ottawa set aside a portion for new entrants in an effort to create a new national carrier and strong regional providers.
While the policy attracted several new players, most of the independent carriers -- operating the Wind, Mobilicity and Public Mobile networks -- have struggled to make money and are currently up for sale.
Videotron, part of Quebecor (TSX:QBR.B), has been more successful in the Quebec market, but Calgary-based Shaw Communications (TSX:SJR.B) decided against using the spectrum it bought to start up a new wireless business.
University of Ottawa law professor Michael Geist, who specializes in e-commerce, called the decision "defensible," but said the government needs to go much further to achieve its goal of increasing competition in the sector.
"The government needs to do more than simply buy time by enforcing the five-year spectrum-set-aside rule," he wrote on his blog Tuesday. "There are a host of other possibilities, including fully opening the market to telecom and broadcast distributors, tough rules on domestic roaming and tower sharing, a full set-aside in the forthcoming spectrum auction, or a regulated wholesale market to create a strong class of MVNO (mobile virtue network operator) competitors."
Paradis refused to acknowledge that the government's policy objective failed, saying since 2008, consumers have seen the average price for wireless services decline by 18 per cent.
"We will not allow this progress to be lost or undermined," he said. "I will not hesitate to use any and every tool at my disposal to support greater competition in the market."
To that end, Paradis said he will postpone the next auction of 700 megahertz of spectrum -- originally slated for November -- to Jan. 14, 2014 in order for the industry to adjust to the new policy parameters.
In essence, the policy keeps in place the five-year limit on transfers of set-aside spectrum, but then places a second hurdle in the way of industry consolidation. Any application for transfers would be rejected if, in the view of the government, it results in "undue concentration" and therefore reduces competition.
-- The Canadian Press