Will the Big 3 eventually purchase the new carriers?

Over the last few months, and certainly over the next few months more will be written about how the Canadian wireless market will be fixed, shaken up and maybe even revolutionized. This is mainly due to new wireless carriers such as Globalive, Public Mobile and DAVE Wireless entering the space this year.

Back on July 21st, after eight weeks and 331 rounds of bidding, a total of 292 licences were sold and the Canadian Wireless Spectrum Auction and grossed the government $4,254,710,327. The auction was set up to encourage more competition in the wireless market from Rogers, Bell and Telus.

Before the auction started, Honourable Jim Prentice, Minister of Industry, said “Our government’s intentions are clear: to achieve lower prices, better service and more choice for consumers and business. We believe in relying on market forces to the maximum extent feasible because competition benefits consumers, and consumers benefit most when markets are as competitive as they can be.”

This brings us to today.

Public Mobile, who spent $53 million in the Auction, is looking to launch in Q3 is said to be going to offer to Canadians a $40 monthly “unlimited flat-rate talk and text package, with no term commitment, no credit checks, no fine print and no surprises”.

DAVE Wireless spent $243.1-million during the Auction will offer phones with no-contract service and unlimited voice and text messaging, free voice mail and long distance within Canada.

Globalive, who invested the most with a staggering $442 million will be offering fixed-price monthly plans that have no contract, allow unlimited calling within your area and rollover minutes. (The leaked document of plans and devices not included)

From looking at the direction of each new entrant, it does seem that us Canadians might be saying so long to the annoying systems access fees, 3-year contracts, call display and voicemail charges. Basically any basic charge that we’ve been paying into for the past few years could possibly be vanished when the new boys come into town.

A few notable quotes:

David Dobbin, president DAVE Wireless: “We are not going to irritate customers. We have a real luxury. We are building from scratch. It’s fresh.”

Anthony Lacavera, CEO of Globalive Communications said “If it’s $40 when I walk out the door, it had better be $40 on my bill. Not $58.”

Alex Krstajic, CEO of Public Mobile said “A lot of the 30% plus Canadians that don’t have a cellphone are value conscious and they cannot afford the unpredictability of bills that we see today in cellphones and the cellphone world, not knowing if it’s going to be 50, 100 or $150… In fact, we’ll have no bill! Why would need a bill if it’s $40 unlimited talk and text? There is no need for a bill”.

After investing billions of dollars over the past several years to build the Canadian wireless market, the real question is: with all this new competition coming to market, is the big three (Bell, TELUS and Rogers) scared or even quivering?

The fact is that each of them has a discount brand. Bell has Solo and now 100% of Virgin Mobile, Rogers has Fido, Telus has Koodo… and each of them has for the past few months started to adjust their pricing. This could have been done due to the new entrants or simply a reflection on our current economy.

The saddest truth about this whole process was stated by UBS analyst Jeffrey Fan: “We believe consolidation amongst the new entrants is inevitable given their complimentary skill sets. As one entity, they would pose a much stronger threat.”

Independently no threat, one entity is a stronger threat. So, clearly if all the new entrants merged they would be a bigger threat. Perhaps the Big 3 will eventually buy out the new carriers and we’ll go back to where we originally started.

More here at The Globe

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