Verizon Considering Acquisition of Canadian Carrier Wind Mobile

Prepaid Canadian carrier Wind Mobile is on the market, and Verizon says it's taking a look.

Verizon Communications is considering buying Canadian wireless carrier Wind Mobile, after Cairo-based Vimpelcom dropped its bid to take over control of the carrier.

"We're looking at the opportunity. This is just us dipping our toe in the water," Verizon Chief Financial Officer Fran Shammo told The Wall Street Journal, according to a June 18 report.

Wind Mobile is a contract-free carrier with approximately 600,000 customers.

According to The Globe and Mail, it's been a year since Ottawa changed its rules to allow foreign investors to have 100 percent ownership of a carrier. Ottawa wants to avoid more market consolidation (just as in the United States, in 2011, the Federal Communications Commission blocked AT&T's bid to acquire T-Mobile, fearing what such consolidation would do to competition).

Earlier this month, Canada's federal government blocked a move by Telus, one of Canada's major carriers, to purchase ailing startup Mobilicity.

"We had to send a clear signal to the market that if there are any proposals resulting in undue concentration of spectrum ... it will not be approved," Industry Minister Christian Paradis told CTV program "Power Play" June 4.

Verizon owns a 55 percent stake in Verizon Wireless, the largest wireless network in the United States, and would have a very difficult time receiving approval to acquire a smaller carrier at home. Shopping in Canada, however, is a different story.

"I don't think there would be too much of an issue getting a deal like this approved, as the Canadian government actually wants to have four major players in all the major Canadian territories," Technology Business Research (TBR) analyst Eric Costa told eWEEK.

"They would likely welcome the opportunity for Verizon to come in and help a smaller Tier 2 operator grow and compete against the big three—Bell, Telus, Rogers," he said.

Canada is planning a sale of 700MHz spectrum that Paradis says he plans to delay from November to Jan. 14, 2014. Ottawa plans to limit the amount that will go to the largest players.

"Verizon would probably gain more spectrum from the auction in the Canadian markets, to help expand Wind's footprint," said TBR's Costa. "The smaller players will be getting priority for spectrum at the auctions."

The United States is also planning to auction spectrum in 2014, and smaller carriers and public interest groups have already called for limits on the amount of spectrum that any one carrier can buy.

Kathleen Ham, T-Mobile's vice president of federal regulatory affairs, blogged June 4 that the 600MHz spectrum coming to auction may be the "most important block of spectrum to be sold in years" and could drastically boost demand for some consumer services, "but only if competitive carriers have a viable opportunity to acquire some of this spectrum at auction."

The U.S. Department of Justice has advised the FCC that access to low-frequency spectrum may determine a carrier's ability to compete, and that it believes smaller nationwide networks should "have an opportunity to acquire such spectrum."

House Democrats, who receive contributions from Sprint and T-Mobile have backed this idea, while House Republicans, who receive support from Verizon and AT&T, have come down against the Department of Justice's suggestion, saying that the DOJ seems "oblivious" to the auction goal of raising money for the federal government and to compensate the television broadcasters that are giving up the spectrum for auction.

General limits, though, may be in line with that goal.

"AT&T and Verizon are the most well-funded and they can win any license they want to win," Harold Feld, senior vice president with consumer advocacy group Public Knowledge, told eWEEK. "But if there are no restrictions on what they can bid on, the others aren't going to bother to show up" and pay the millions required to enter the auction.

Not being a target of criticism at a spectrum auction would be a novelty for Verizon.

While the Canadian government wouldn't allow Verizon to acquire one of its major carriers, "it's all for boosting a Tier 2 player through a potential acquisition," said Costa.