Shaw seen as biggest winner in spectrum decision but stocks show little change

A Shaw Communications sign at the company's headquarters in Calgary on Januaary 14, 2015. Analysts said Thursday that Shaw Communications Inc. was the big winner from Ottawa's decision to set aside 43 per cent of the next spectrum auction for regional wireless carriers and potential new rivals, but stock markets didn't react. THE CANADIAN PRESS/Jeff McIntosh

TORONTO - Analysts said Thursday that Shaw Communications Inc. was the big winner from Ottawa's decision to set aside 43 per cent of the next spectrum auction for regional wireless carriers and potential new rivals, but stock markets didn't react.

"Given well-established network partnerships . . . and consolidation over the years, we believe none of the key wireless players in Canada are really starved for spectrum," telecom analyst Phillip Huang wrote for Barclays Capital.

"Having said that, Shaw still has the smallest spectrum portfolio compared to its peers, and we believe the 600MHz auction is most important to Shaw."

However, Huang and other analysts said the government's position had been well-telegraphed and they didn't expect much impact on share prices.

At the end of trading Thursday, none of the five publicly traded companies with wireless operations was up or down even a full percentage point and the only decline was Shaw, down five cents to $24.82 — about 0.2 per cent.

The Calgary-based cable, internet and satellite company is relatively new to the wireless industry which it hadn't pursued aggressively until it bought Wind Mobile two years ago and rebranded it as Freedom Mobile in late 2016.

Canaccord Genuity analyst Aravinda Galappatthige agreed that Shaw, as well as Quebecor's Videotron cable division, would be able to enhance their spectrum position at a relatively low cost.

"Recall the incumbents had argued against set-asides for Shaw and Quebecor, highlighting that these are well-established cable companies and that their wireless operations can no longer be deemed 'new entrants', " he wrote.

Nevertheless, he added, it's apparent the government "is keen to move ahead with its initiatives to improve wireless affordability in Canada and believes that this framework would further encourage greater competition."

Innovation Minister Navdeep Bains said as much in an interview Thursday.

"Canadians pay some of the highest cell phone prices in the G7 (industrialized countries) and we, as a government, want to see the prices to go down for Canadian consumers," said Bains, who is the minister responsible for telecom.

"By putting aside 43 per cent of the spectrum, for regional competitors and potential new market entrants, we believe this will increase competition, this will promote better quality services and — more importantly — this will provide affordable prices for Canadians."

However, Bell Canada — which has the country's largest telecommunications and media business — issued a statement Thursday re-iterating its opposition to giving Shaw and Quebecor such a financial advantage.

"Even prior to this decision, the federal government had handed out $4 billion in wireless spectrum subsidies to cable companies over the last 10 years," Bell said.

"In terms of new entrants, we expected some level of spectrum set asides but 43 per cent is far too generous considering the level of subsidies they've already received over the years and their slow pace of service rollouts."

Rogers Communications Inc. was also critical of the government's spectrum decision that was largely in line with its position going into a consultation process that began last year.

"The wireless market is fiercely competitive with four facilities-based service providers with multiple brands in virtually every market competing to win the hearts and minds of Canadians, and the startups of a decade ago are now well-capitalized regional players who do not require government assistance," said David Watt, Rogers senior vice-president for regulatory affairs.

"Going forward, we hope the government recognizes this and adopts more balanced auction rules as the country gets ready for 5G."

Companies in this story: (TSX:RCI-B)(TSX:BCE)(TSX:SJR.B)


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