Heavy bidding continues for Toronto licences as PCS fight tops $200 million

Intense bidding for Toronto PCS spectrum by the five remaining national players could push the final price tag for Canada’s hottest market as high as $90 million or higher as companies head into week two of the auction today. How high Toronto, as well as Vancouver and Montreal, eventually sell for could depend on new entrant W2N Inc, which is emerging as the darkhorse against Bell Mobility and Rogers Wireless in the battle for 2 GHz spectrum. W2N is bidding aggressively for two of the four licences up for grabs in Toronto, and in all likelihood will secure at least one of them. 2GHz PCS AUCTION RESULTS AT THE CLOSE OF ROUND 10High PoPsTotal high bidsPrice/PoPStanding high bid3050443 NS Co8,180,0001$3.69$30,200,000Bell Mobility30,064,00012$1.54$46,420,000Microcell Telecom0000Rogers Wireless24,125,00015$1.06$25,620,000Telus Mobility17,045,0005$2.60$44,400,000Thunder Bay825,0001$0.73$600,00W2N30,170,0007$2.92$88,080,000Total auction haul is well over $200 million and each of the four licences for southern Ontario will fetch about $35 million each today. Source: Raw data provided by Industry Canada, tabulated data by Decima Publishing. By the end of Thursday’s bidding, total high bids stood at over $200 million for all of Canada. By Friday morning, prices for each of the Toronto properties were topping $25 million, and bids should be taking a steep climb as this week progresses. But with five companies collectively coveting 16 licences in the Greater Toronto Area – when only four are available – the next show to watch could be happening in Canada’s hinterlands. Those companies that aren’t successful in Toronto will begin bidding on properties outside the major centres. MICROCELL OUT OF THE RUNNINGThe first casuality in last week’s race was Microcell Telecommunications Inc, which pulled out of the auction when prices for Toronto, Vancouver and Montreal began rising beyond its comfort threshold. The company’s VP of regulatory, Dean Proctor, told RoW their departure shouldn’t come as too much of a surprise. "As we have told anybody who is willing to listen, we don’t need spectrum," he says. "This is not a 3G auction. This is leftover 2G spectrum – what was hanging around in the back of the fridge. We were going to be opportunistic in this. We put down a deposit for the maximum in an attempt to understand what was going to be going on."With Microcell Telecommunications Inc now out of the running, the remaining contestants bidding for Toronto, Vancouver and Montreal are Rogers Wireless Inc, Bell Mobility and Telus Corp and new entrants W2N Inc and Sprint Corp-backed 3050443 Nova Scotia Co. Rogers and Bell are the two most spectrum strapped of any of the players and need frequencies in the Greater Toronto Area to relieve capacity constraints. Rogers also needs the spectrum to accommodate a growing number of subscribers that are switching from bandwidth hogging analog phones to more spectrum efficient PCS. Telus has remained active in the GTA although it doesn’t really need the spectrum. The western telco snagged PCS licences in the major Ontario cities with its acquisition earlier this year of Clearnet Communications Inc (RoW, Sept 5/00). But it will likely keep bidding for licences in the GTA if for no other reason than to keep potential new entrants from winning them. The companies to watch in this race continue to be W2N and Sprint. As prices for Toronto continue to rise, the incumbents may have underestimated the willingness of the new players to bid heavily for spectrum in the Ontario capital. Joe Church, who heads W2N, has displayed an unwavering desire to pay as much as it takes to get spectrum in the country’s two largest markets. This isn’t the first time Church has bid big money for a single licence. In the country’s first-ever spectrum auction for bandwidth in the 24/38 GHz range in October 1999, his company Wispra Networks Inc paid $35 million for one licence for the GTA. With the financial backing this time around of U.S.-based Goldman Sachs, Church has the resources to secure at least one Toronto licence. Neither Church nor his partner itemus Inc, have revealed any details of the type of network or services to be offered if the company wins spectrum. The Sprint-back numbered company hasn’t showed any signs of backing down either. It has lost more than half of its eligibility points, but is concentrating on the three largest markets. The company isn’t looking to build a national PCS network from scratch. If U.S.-owned Sprint lands spectrum in the major cities, it will likely wait until foreign ownership rules are changed to allow it to buy an existing Canadian player. At the time of publication, GTA licences are approaching $30 million and Decima Publishing estimates that’s only 30 per cent of the full value of the licence. With at least two weeks of bidding still to come, the bandwidth there should top $80 million. All four properties may end up netting the government $320-$400 million. Less populated regions come into play In the last half of week one, both Rogers and Bell started scooping up real estate in more sparsely-populated regions of the country at bargain basement prices. The price per PoP for licences outside of Toronto, Montreal and Vancouver won’t fetch hefty price tags, but will serve as important properties for the incumbents. Rogers and Bell are the standing high bidders on several licences in the Prairies and in Atlantic Canada. Minimum bids of $300,000 in Newfoundland and $600,000 in Nova Scotia/Prince Edward Island, New Brunswick, Saskatchewan and Manitoba should render these properties very attractive. Rogers has been bidding at nearly 100 per cent of the eligibility points on which it placed a deposit in all regions of the country. At the time of publication, it was standing high bidder on 15 licences. Bell began to bid on licences in Manitoba and Saskatchewan and Atlantic Canada in round five, and is standing high bidder on 12 licences overall. Bidding in the smaller regions will pick up after the licences in Toronto are settled. The incumbents would rather secure these spectrum licences and have them available for future use than see them revert back to Industry Canada. If barriers to foreign-player entry fall as expected, reserved spectrum blocks could be used by a new entrant, backed with newly allocated spectrum in future rounds, to build a national network. That’s a risk the Big Three WSPs are unwilling to take.

Heavy bidding continues for Toronto licences as PCS fight tops $200 million

News | 01/22/2001 5:00 am EST

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