TELUS CEO Warns of ‘Bloodbath’ if Verizon Gains Advantage in Spectrum Auction

TELUS CEO Darren Entwistle, speaking at an editorial board meeting on Thursday, told the Financial Post Ottawa’s goal of having four national wireless carriers could result in negative consequences for incumbent carriers:

His primary concern is that if a foreign player with massive resources such as Verizon Communications Inc. takes part in the Canadian auction, it would be treated as a “new entrant” and permitted to bid on up to two out of four prime blocks of spectrum.

The Canadian incumbents would be capped at just one block, leaving Telus, BCE Inc. and Rogers Communications Inc. as well as smaller regional players such as Videotron fighting over the two remaining blocks of spectrum.

“There’s going to be a bloodbath, because people are not going to give up on getting that block,” Mr. Entwistle said. “So it’s going to be prohibitively expensive and suck a lot of money out of the industry – money that won’t go to infrastructure and technology, money that won’t go into rural coverage or support lower prices.”

So the increased spending by incumbents to ensure they don’t miss out on the 700 MHz spectrum would result in less investments in infrastructure, could negatively affect rural wireless coverage, and threaten monthly prices.

Interestingly, Entwistle says it might be tough to work together with fellow rivals because “The level of bitterness on the competitive front between Telus, Bell and Rogers makes it very difficult to collaborate unless the circumstances are extremely dire.”

All three incumbents want a level playing field. Entwistle suggests three changes for Ottawa to make: open up the auction entirely and remove purchase caps on players; cap Verizon like incumbents; allow bidders to purchase up to two blocks of spectrum.

Yesterday, Verizon noted during the company’s quarterly earnings call their interest in Canada was an “exploratory exercise.” Things look to get interesting in the next year or two on the home wireless front.

TELUS acquired spectrum licenses form Novus Wireless last month

In a separate report, The Financial Post reveals TELUS last month purchased spectrum from Novus Wireless, the same frequencies used by Public Mobile:

Industry Canada licences dated June 27 show Telus now owns the right to use airwaves in the so-called G-band frequency covering the provinces of Alberta and British Columbia. The government originally sold those licences to Novus Wireless Inc. in the 2008 public spectrum auction.

TELUS had earlier attempted to acquire cash-strapped wireless entrant Mobilicity for $380 million, but the deal was rejected by Ottawa, citing spectrum set aside for new entrants “was not intended to be transferred to incumbents.”