Analysis – MTS Allstream going national

It appears MTS Allstream Inc. is pulling out all the stops in its bid to expand wireless operations beyond its Manitoba borders. The company announced on Monday that it formed a consortium with Canada Pension Plan Investment Board and The Blackstone Group LP to bid on wireless bandwidth in the upcoming advanced wireless services (AWS) spectrum auction set to begin on May 27. The consortium put down a deposit of $340 million and, if successful in winning licences, the new wireless operation would be headed by André Tremblay, founding CEO of Microcell Telecommunications. With a deposit this large, the MTS consortium will likely bid on more than just the 40 MHz of spectrum set aside for new entrants. The amount doesn't allow the company to bid on a full 60 MHz of spectrum in all regions of the country - that would have required a deposit of slightly more than $350 million - but it enables the consortium to acquire additional wireless bandwidth in some of the major centres and regions across the country. Given MTS Allstream's significant presence in the enterprise market, it seems likely that, in addition to the 40 MHz of reserved spectrum, it would seek to acquire spectrum in the country's top markets. According to Report on Wireless' analysis, the MTS consortium could acquire 20 MHz of spectrum in all of the country's top markets as well as other smaller regions. The MTS consortium will have to battle hard, and likely pay a lot of money, to acquire non-reserved spectrum. It will be bidding against the Big Three - Bell Mobility, Rogers Communications Inc. and Telus Mobility - for a piece of this bandwidth. With the three companies already upset because the rules allowed for a set aside in the first place, and mandated roaming and tower sharing, they will likely pay a king's ransom to keep the MTS consortium out of the non-reserved bandwidth. While the MTS consortium has the financial backing to take on the Big Three in auction, the company could also be making a larger than necessary financial commitment to give it greater flexibility during the auction. Based on the auction rules, the deposit is translated into eligibility points and the level of points dictates how many licences a company can bid on. In the early rounds of the auction, a company doesn't need to be fully utilized - meaning it doesn't have to make bids covering all of its eligibility points. This changes as the auction progresses and in the final stages it has to be bid all of its eligibility points or it loses points, which reduces the number of licences it can bid on in subsequent rounds. MTS consortium's ability to acquire the full 40 MHz of reserved spectrum is by no means a forgone conclusion. With the likes of Yak Communications Inc. and Shaw Communications Inc. having submitted applications, it seems likely there will be fight for some of this bandwidth. And with Vidéotron ltée recently signalling its intent to go national as well, the battle between new entrants could be more intense than previously thought. There are still some unanswered questions that will undoubtedly affect the ability of the MTS consortium to win spectrum. What is SaskTel going to do? Is it part of this consortium or is it going to step in the ring and fight for a piece of the new entrant wireless bandwidth? Where does Vidéotron stand in all of this? Is it really going to go national or will the price for bandwidth outside of Quebec get too high? These questions will be partially answered later this week, but the real intentions of auction participants won't be known until the bidding begins later this spring. RoW will have more details on applicants and their potential strategies in the coming days.

Analysis – MTS Allstream going national

News | March 13, 2008

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