The Vancouver cellphone company wants the Federal Court to review a recent decision by the federal government that blocked it from buying struggling small carrier Mobilicity in a $380-million deal.
Telus (TSX:T) said it's concerned the decision by the former industry minister could put billions of dollars of investment at risk, cost Canadian jobs, and result in huge foreign companies being given regulated advantages over Canadian companies.
U.S. carrier Verizon is reportedly interested in entering the Canadian market and buying new carriers Wind Mobile and Mobilicity when the small carriers' spectrum licences expire. Under the new rules, Telus, Bell (TSX:BCE) and Rogers (TSX:RCI.B) are prevented from bidding for the licences without ministry approval.
"Canadian investors put billions of dollars into the new wireless companies understanding they could not transfer their spectrum for five years but would be able to do so after that time, giving them a way to get some money out if the firms ran into financial difficulty," said Telus spokesman Shawn Hall.
Former industry minister Christian Paradis announced the new rules at the end of June, as part of changes to increase competition in the wireless sector that has been dominated by the three large companies.
"The minister's statements seem to re-write that to indefinitely extend that restriction, which could well cost those investors millions of dollars while preventing Canadian companies like Telus from purchasing other Canadian companies in financial distress. It could also force those companies to sell at fire sale prices to foreign companies, in the absence of real competition to buy them."
Telus said it's hopeful that new Industry Minister James Moore will clarify the rules.
A spokesman for Moore said the government is aware of the request by Telus for a judicial review and has no further comment.
"Our government's view has been clear. We want effective competition across Canada," said spokesman Sebastien Gariepy. "Greater competition means better prices for Canadian consumers."
In its court filing, Telus said the former minister didn't have the jurisdiction to change the rules for transferring spectrum licences when they expire after five years.
Bell also supports Telus's efforts to have the rules clarified.
"The ban on major Canadian providers acquiring wireless startups in Canada, when U.S. entrants like Verizon can, is one of three loopholes in the rules that need to be corrected," Bell spokesman Mark Langton said.
"The others are of course the preferred access to Canadian wireless spectrum for U.S. players and their right to use the networks of Canadian carriers."
Bell CEO George Cope has said Verizon wouldn't build its own network across Canada to reach rural communities and would concentrate on a few big urban centres, forcing Canadian carriers to do the same while potentially cutting jobs and slashing costs in order to compete with the U.S. carrier.
Cope has also said that Bell, Rogers and Telus have taken a cumulative hit of $15 billion on the capital markets since the news broke that Verizon could enter the Canadian market.
Two consumer groups, however, disagree the companies on the possible entry of Verizon into Canada.
The Consumers’ Association of Canada and the Public Interest Advocacy Centre said the federal government has been clear that it wants more wireless competition.
"Bell, Telus and Rogers are trying to scare Canadians with misinformation," said Bruce Cran, president of the Consumers' Association of Canada. “We are happy that new Industry Minister Moore is staying the course on spectrum."
Foreign ownership restrictions have been removed for small wireless companies with less than a 10 per cent of the market, which opens the door for Verizon and other foreign companies to enter Canada. However, big carriers still can't be more than one-third foreign owned.
Verizon has more than 100 million wireless subscribers while Rogers, Telus and Bell have about 25 million between them.