BUSINESS

Verizon In Canada Would Mean ‘Significant Financial Disruption' To Local Telecoms: Report

08/07/2013 05:25 EDT | Updated 08/08/2013 12:45 EDT
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The Verizon Communications Inc. logo is seen at the International Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Thursday, Jan. 12, 2012. The 2012 CES trade show, which runs through Jan 13, features more than 2,700 global technology companies presenting consumer tech products and is expected to draw over 140,000 attendees. Photographer: Andrew Harrer/Bloomberg via Getty Images

Haters of Canada’s big telecoms (and we know there are lots of you), here’s your chance to gloat.

The country’s dominant wireless carriers lost $5 billion of their stock market value simply on speculation that U.S.-based Verizon is coming to Canada, and the telcos stand to lose far more if the wireless carrier comes north, according to an analysis from global banking giant Credit Suisse.

“A committed challenger could cause significant financial disruption to incumbents,” analyst Colin Moore wrote in a research note Wednesday.

Moore looked at wireless markets where there are four major players, and found there aren’t too many of them — only about 30 per cent of 34 OECD countries have more than three major carriers.

In France, the arrival of a fourth major player — Iliad — shook up the industry so much the country's telecoms are worth 35 billion euro ($48.6 billion) less than they were in 2009, when Iliad arrived, Moore wrote.

He noted that Iliad has gained 10 per cent of France’s wireless market “through disruptive pricing” — cheaper wireless rates.

But success for a fourth player is not guaranteed. The report notes that a fourth wireless company in most developed markets rarely manages to get more than 10 to 15 per cent of all wireless customers. Markets with four players often experience consolidation and end up with three players again, Moore noted, though in Canada regulations could stop that from happening.

Still, Moore argues Verizon has a good chance in Canada, thanks to its deep pockets.

Such predictions are perhaps why Canada’s big telecoms have gone all-out in a recent campaign to keep Verizon out of Canada, or at least to keep the U.S.’s largest wireless company from enjoying the advantages Canada’s regulatory regime gives to new wireless entrants.

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The big three — Bell, Rogers and Telus — last week launched “Fair For Canada,” a website designed to rally public support behind their efforts to change wireless rules ahead of a crucial wireless spectrum auction early next year. The rules set aside more spectrum -- the radio frequencies used for cell phone signals -- for new players than they do for the Big Three, leaving the incumbents fighting for a smaller portion.

The website came in for some derision from consumer advocates when it emerged that the “ordinary people” featured in the ads were actually employees of the telecoms.

Telus CEO Darren Entwistle has been among the most vocal campaigners trying to keep Verizon out of the country, warning recently of a “bloodbath” in the industry if the company is allowed to come here under the current rules.

Bell CEO George Cope recently penned a letter to “all Canadians” extolling the company’s investments in Canada.

Blogger Ben Klass responded by noting that Bell Canada was 50-per-cent owned by the U.S.'s Bell Telephone company until 1970, and that Verizon is actually a descendant of that same company.

You suggest that ‘U.S. giants don’t need special help from the Canadian government,’ but that’s exactly how Bell got to where it is today,” Klass wrote.

Some of the big telecoms have gone further than publicity campaigns. Telus last month took the federal government to court, asking the court to clarify Canada’s wireless rules following the Department of Industry’s rejection of Telus’ bid to buy the wireless spectrum of Mobilicity, a struggling small wireless player.

None of this appears to have budged Canada’s new industry minister, James Moore. In a statement last week, Moore stood by the existing rules for the upcoming wireless auction, which would allow Verizon, as a new entrant, to bid on twice as many spectrum blocks as the big local players.

Moore said the country still needs more wireless competition.