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Thread: Fourth Carrier Will Bruise Incumbents (ScotiaBank)

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    Fourth Carrier Will Bruise Incumbents (ScotiaBank)

    http://www.theglobeandmail.com/repor...board/follows/

    Canadian telecom shares dipped Tuesday morning after an analyst report laid out a path to a fourth national wireless carrier and argued the federal government is willing to do whatever it takes to make it happen.

    In a research note dramatically titled, “Government Ready to Deliver the Final Blow,” Scotia Capital Inc.’s Jeff Fan cut his target prices on Rogers Communications Inc., BCE Inc., and Telus Corp. Mr. Fan said he believes the Big Three carriers’ dividends are safe but warned growth expectations should be tempered if that fourth competitor emerges.

    “We estimate the dividend growth over the next three years for Rogers, BCE, and Telus will be ~2 per cent, ~4 per cent and 0 per cent, [respectively],” he wrote.

    The companies’ shares fell between 1 per cent and 2 per cent following Mr. Fan’s report, which said Quebecor Inc. “holds all the strategic cards” and will wait until certain conditions are in place. Once they are, the company is likely to spearhead the formation of a fourth national operator through a partnership approach that includes financial players.

    “We believe Quebecor can structure a transaction to enable it to invest and preserve balance sheet flexibility to buy out the Caisse de dépôt et placement du Québec’s 25 per cent interest in Quebecor Media before 2019. Quebecor’s involvement also gives financial investors an exit path,” Mr. Fan said, noting Quebecor itself or the public market could be buyers five to seven years down the road.

    In his view, Ottawa must still block Rogers from acquiring unused spectrum from Shaw Communications Inc. in September and, crucially, establish wholesale data roaming rates at a favourable price for a fourth player before the deadline for the next spectrum auction.

    Quebecor has said it wants to see “fair” rates for roaming on its competitors’ larger networks before it makes a final decision on expanding. Mr. Fan said he believes the government will make sure that certainty is in place before the AWS-3 spectrum auction it announced last week gets underway in early 2015.

    “Unless the CRTC/Industry Canada establishes a rate in the $0.005 to $0.01 per megabyte range, we do not believe fresh capital will be committed by Quebecor or its partners to [a fourth competitor],” Mr. Fan said.

    “Industry Canada has demonstrated that it is willing to do what is needed,” he added, noting that he believes the CRTC will announce the results of its wholesale roaming review before the AWS-3 auction and that Industry Canada could vary that decision if it is not satisfied with it.

    Other analysts, such as Macquarie Capital’s Greg MacDonald, share Mr. Fan’s view that the government is willing to do what it takes to create the conditions for a fourth operator and that the path looks more likely than ever now.

    Decidedly on the other side of the debate, Dvai Ghose, head of research at Canaccord Genuity, responded Tuesday morning with his own publication noting he finds it hard to take the possibility of Quebecor’s national wireless strategy seriously.

    Mr. Ghose sees a number of barriers to expansion: four-player markets have been unsuccessful globally, he argues; Quebecor’s majority shareholder is an elected representative of the Parti Quebecois and determined to break up the country which could spell trouble with the federal government; Videotron has no competitive advantages or brand recognition outside of Quebec; and regulators can be a fickle bunch, he adds.

    Mr. Ghose also sees a timing problem, in that he expects the decision on the roaming rules to come down after the 2015 AWS-3 spectrum auction has already occurred.

    “Consequently, 1) there is no immediate national threat from Videotron; and 2) Videotron/Quebecor may not get the roaming concessions that they are looking for. As a result, for us, it is still far from certain that Videotron will even launch nationally.”

    “We are beginning to see decent buying opportunities for Canadian incumbent wireless stocks and note that such dips in the past – 2008-2009 on the WIND threat; 2013 on the Verizon threat – provided strong buying opportunities,” Mr. Ghose concluded.

    Rogers shares were down 1.17 per cent or $0.49 per share to $41.46 on the Toronto Stock Exchange shortly before noon Tuesday. BCE stock was down 0.89 per cent or $0.41 to $48.59 while Telus shares were down the most at 2.1 per cent or $0.82 per share to $38.27.

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    Mr. Ghose sees a number of barriers to expansion... Quebecor’s majority shareholder is an elected representative of the Parti Quebecois and determined to break up the country which could spell trouble with the federal government
    Péladeau a ‘passive shareholder,’ Quebecor says
    Globe and Mail, July 14

    Quebecor is drawing a clear line between itself and its controlling shareholder, Pierre Karl Péladeau, insisting the separatist Parti Québécois MNA has no say in the direction of a company that might be poised to play a major role in Ottawa’s plans for a more competitive wireless market in Canada.
    ...

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    Scant mention of WIND in the article and when they are mentioned it's not as the fourth player.

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    Quote Originally Posted by Mann Incognito View Post
    Scant mention of WIND in the article and when they are mentioned it's not as the fourth player.
    you gotta remember that wind has a for sale sign on its door...
    With Wind Since Early 2010.
    50 promo everywhere
    Pay your way 2012

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    if the canadian banks are willing to back tony, then tony may have a chance. Give tony an interest free loan to get the 600 spectrum and the aws-3 spectrum. Hopefully tony is getting something the big 3 have all gotten. Interest free loans for spectrum.

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    Quote Originally Posted by bluebell_rose View Post
    if the canadian banks are willing to back tony, then tony may have a chance. Give tony an interest free loan to get the 600 spectrum and the aws-3 spectrum. Hopefully tony is getting something the big 3 have all gotten. Interest free loans for spectrum.
    Won't happen as Wind doesn't have the assets/collateral or other backing. And as we have seen, foreign telecom investment in Canada is a no-go. The best hope for Wind to remain as a solid standalone company is to be able to partner with a Videotron-centered alliance so Wind will provide the large-city coverage. Otherwise, Wind will remain a small urban player with very limited growth potential, go bankrupt, or be bought up by Videotron, Eastlink, or some partnership thereof.

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    Quote Originally Posted by bluebell_rose View Post
    Give tony an interest free loan to get the 600 spectrum and the aws-3 spectrum.
    Lol why would banks do this and take the loss? Remember, this money if given to others at an interest, EARNS THEM money. A 0% loan to tony causes them to miss these earnings AND they have to pay the salaries / time for the staff involved. What would the banks gain from doing this charity work?

    The only reason they might do so is if they get shares on wind, so they can eventually sell for a profit. This is not possible because wind doesnt make a profit and secondly it cant be sold easily because of the government regulations and no one wants to buy them.

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    tony thinks wind will make a profit in 2015 xD

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    Quote Originally Posted by bluebell_rose View Post
    if the canadian banks are willing to back tony, then tony may have a chance. Give tony an interest free loan to get the 600 spectrum and the aws-3 spectrum. Hopefully tony is getting something the big 3 have all gotten. Interest free loans for spectrum.
    Oh don't stop there, let's petition an openmedia.ca petition form forcing 1 in 4 Canadians must use WIND.
    I also believe we should have a 1% federal tax where the money goes right to WIND.

    Do you just say things as a matter of fact?

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    Quote Originally Posted by Mann Incognito View Post
    Scant mention of WIND in the article and when they are mentioned it's not as the fourth player.
    Because Wind is a small regional player with no money or intent to expand
    It is sad I need to state the obvious but some people just don't get it. Any posts I make are my own OPINIONS and in no way represent the views of my employer

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