What does TELUS want with Mobilicity? It’s all about the spectrum

Daniel Bader

April 12, 2013 3:06 pm

telus-tower-19-08-2011

Earlier today it was revealed that TELUS is in talks with Mobilicity to purchase its assets and AWS spectrum, which the new entrant spent $243 million in 2008 to acquire. Despite government pushback against excessive license transfers (they’re considering a change of rules to prevent the incumbents from purchasing an unfair amount of spectrum) and an abrogation against transfers themselves until early next year, Rogers, Telus and Bell are looking seriously at their options.

Rogers recently entered a deal with Shaw Communications to purchase its unused AWS spectrum, though currently it is an “option,” since the transfer can’t happen until 2014. Telus’ reported $350-400 million offer to Mobilicity is in the same vein: the extra subscribers and tower hardware would be a bonus, but the real deal is for the spectrum.

Wind and Mobilicity run their HSPA+ networks on what’s referred to as AWS, or Advanced Wireless Services frequencies, instituting 1710-1755 Mhz for the uplink (to the server) and 2110-2155 MHz for the downlink (from the server). It was this block of spectrum that the Canadian government auctioned off in 2008, raising over $4 billion in the process. Whereas it functioned to supply these upstart carriers the airspace they needed to deploy towers in Canada’s largest cities, the incumbents purchased as much AWS spectrum as they could to roll out future LTE networks.

TELUS-Spectrum-Depth

It is in this situation we find ourselves today. According to Greg O’Brien, editor and publisher of popular industry journal Cartt.ca, spectrum is now the key play for all future telecom acquisitions; there’s a limited amount to go around, and the more a carrier has, the better guarded it is for the future.

Telus has a greater need for spectrum than its incumbent peers, especially in central and eastern Canada where it is at a huge disadvantage in terms of capacity. LTE devices require at least 10Mhz of spectrum in a given market to ensure each channel has the requisite 5Mhz necessary to reach advertised uplink and downlink speeds. Telus only owns 10Mhz of AWS spectrum in high-density areas like Toronto, making Mobilicity (which also owns 10Mhz of AWS spectrum, albeit on a different block) a highly-desirable acquisition target.

Earlier this year, when the government of Canada announced its intentions to auction off its 700Mhz spectrum in November, Ted Woodhead, SVP of Federal Government and Regulatory Affairs at Telus, remarked on the company’s excellent spectral efficiency in a blog post titled Waiting for 700MhzIn it he claims that “[Telus] serves roughly the same number of customers as our major competitors with significantly less spectrum available.  This means we are more spectrally efficient than our competitors based on customers served versus spectrum available.”

While the chart and tally (see above) is accurate, fails to mention Bell’s and Rogers’ extensive supply of 2600 Mhz spectrum that has been used, in part, to take the burden off its strained AWS network in some parts of Canada. Rogers has launched several devices, such as the LG Optimus G and upcoming BlackBerry Q10, that take advantage of the full 10x10Mhz 2600Mhz band in most parts of the country, and will likely roll out more products as the network matures.

O’Brien also points out that while Mobilicity may be looking to unburden itself of its extensive financial difficulties, the reported talks with Telus are likely quite immature (they date back to February) and the new entrant would be advised to auction its valuable spectrum to the highest bidder once it is free to do so. Another potential bidder would be former Orascom CEO Naguib Sawiris, who is rumoured, along with Globalive owner Tony Lacavera, to be making a play for Wind Mobile Canada. Pairing the two companies’ AWS spectrum would give it enough bandwidth to compete with the incumbents in most major markets, and together could drum up enough new customers to support an investment in Apple’s iPhone.

Telus has not commented on its proposed plan to buy Mobilicity, but since the company is traded publicly, such intentions would have to be announced before any decisions could be made.

  • disqus_kCPMN1BEYg

    If this happens WIND will be the next to go down and everything that these two companies built since 2010 will become pointless. However, Telus cant do this without CRTC’s approval and public hearing, therefore as soon as they make this thing a realty we need to tell CRTC this is not OK, this is uncompetitive and only winner here is Telus

    • lakhijhajj

      And exactly how we do that? CRTC is funded by the big three or at least the members are. So how are we safe in the hands of CRTC ?.When they can’t even cancel the 3 year contracts from the big 3 , you think they can get this deal cancelled. If CRTC gets our phones unlocked and cancel 3 yr contracts than I can trust them. Otherwise it’s all Politics

  • silver_arrow

    As a Telus customer who would really like better LTE coverage I would be fully opposed to
    this. I know it would help their networks and as is Mobilicity is really small and I wouldn’t use them but they exist.

    Their existence has gotten Caller ID included in plans, it made voicemail included too and made the Mini 3 have better more competitive plans. It also made carriers like Rogers and Telus offer phones on two year contracts and they have some damn good phones on two
    year contracts.

    Frankly if Mobilicity went away it Wind might want to be less innovative and cheap
    because Mobilicity would no longer offer dirt cheap plans so Wind would become the only alternative to the big 3 … and at that point I could see it being the big 4

    It’sa loose for everyone except the big 3 and even a loss for their customers as
    they enjoy better coverage they will definitely be paying for it.

    • lakhijhajj

      These 3 guys have made the Big 3 give us unlimited plans in terms of minutes and texts if not data. They have made them up with activation fee. They have forced them to go LTE bec that was the only way they would have survived otherwise WIND was giving them a big run for their money. LTE saved the BIG3

  • EvanKrosney

    Hopefully this isn’t the start of a trend, because if WIND goes down, the market will be set back 5 years to 2008 and competition will be back to a minimum.

  • Eddisonlane

    We need more competition not less.

  • Victor

    10Mhz if AWS spectrum will hardly make a dent for Telus. It’s a take out, pure and simple. Nice thought though.

    • Daniel Bader

      It would be a huge deal for Telus in high-density areas like Toronto. Carriers will need at least 20Mhz to launch LTE-Advanced, which is expected in a couple of years, so Telus will do whatever it takes to make it happen.

    • lakhijhajj

      Daniel , what do you think is gonna happen? Any predictions and solutions to save WIND & MOBLICITY! Don’t you think LTE will save WIND bec it’s gonna get all those customers who are heavily depended on data usage , but are scared to join WIND bec of its slow HSPA speeds and lack of LTE! I am one of them

  • graze81

    “Another potential bidder would be former Orascom CEO Naguib Sawiris, who is rumoured, along with Globalive owner Tony Lacavera, to be making a play for Wind Mobile Canada. Pairing the two company’s AWS spectrum would give it enough bandwidth to compete with the incumbents in most major markets, and together could drum up enough new customers to support an investment in Apple’s iPhone.”

    THIS, is what needs to happen. We need a large, fourth party in this country. We need MORE, actual choices.

    • silver_arrow

      Agreed that would be big I would be all in favour of a Windicity network

    • Kate SI

      Haha Windicity! Good name

  • Croc Ography

    First and foremost they wish to squash competition.

  • TomsDisqusted

    Unfortunately, I think the similarities are becoming less: T-Mobile plans to move 3G support to 1900 and redeploy AWS as LTE. I don’t think Wind/mobi have any 1900 spectrum (the incumbents have that) that would allow them to follow suit.

    • Daniel Bader

      Wind and Mob have no PCS spectrum at all which makes it harder for them to roll out LTE, since they’ll have to refarm existing spectrum.

      If they do end up consolidating into one company, I see them using 700Mhz to deploy LTE and piggybacking on their existing AWS spectrum to facilitate phone calls and 3G data speeds, much like the incumbents are doing with PCS/AWS.

    • TomsDisqusted

      But I think that leaves them as the only ones using AWS for 3G in the world. That’s untenable. I think TM’s announcement was very bad news for Wind & Mobi, but it might take TM a long time to follow through and is dependent on successful completion of merger.

    • ToniCipriani

      T-Mobile won’t switch off HSPA on AWS overnight. Only their more recent phones have HSPA on PCS, unless they want some angry customers and have to replace all their phones.

  • Plazmic Flame

    Definitely wasn’t expecting Telus to be trying to offer people better rates and unlimited data. It almost seems inevitable really…. Mobilicity is either going to sell to Telus or Wind. It would be great if they sold out to Wind, make them more of a powerhouse but then Wind is on the selling block too….. ugh… It’s going to take a Christmas miracle to save the Little 3… :(

  • sk1d

    Everyone knew this was coming. Mobilicity only bought spectrum in a few urban centers. Public bought some marginal spectrum no one else wants. Neither were in it for the long haul, they were just hoping to make a quick buck. Wind is the only one who bought spectrum all across the country and sought out some serious international financing.

  • canuck07

    Seriously, spectrum is public resources. No company should ever own one and the government should only lease them out.

    • Savbers

      yeah but then it would cost us more.

  • lakhijhajj

    IMO Wind CEO and Globalive should try and merge Moblicity with Wind Mobile, then launch LTE first and try and bring iPhone aboard. This will be their success formula and there is no looking back after this. I personally am waiting for iPhone on WIND(and am certain more than ever after its available on T-Mobile. I am sure there are others who want WIND & MOBLICITY to emerge as a 4th National Carrier.

    • Kate SI

      Iphone is on board with Wind. It was already announced. But nowwe need LTE

    • lakhijhajj

      But it’s not available through WIND yet on Wind Tab. Yeah we can buy unlocked from Apple and use it but still Apple Canadian website iPhone 5 spec sheet don’t show AWA 1700/2100 freq that’s needed for WIND. But their US apple site shows this freq. under the model number A1428. If WIND starts selling it on WINDTAB iPhone 5 will be more affordable. People will buy more and WIND can earn more customers.

  • Netguru

    A Telus takeover of Mobilicity would run counter to the announcement Christian Paradis, Industry Minister, made on March 7th when he stated “taking action to promote at least four wireless providers in every region of the country”..

    • Tyronne

      Rogers, Fido, Chatr, and Petro-Canada Mobility (which runs on Rogers’ network). There – you have 4 players, who are, essentially, one company. See how that works? ;)

    • Rt

      You forgot about Speakout

    • LeafsFanGirl

      Rogers does own Fido and Chatr. I read that Rogers can’t own another company. The rumour is Rogers will merge Chatr with Fido and they will go after Wind Mobile. This really sucks.

  • LeafsFanGirl

    I’m not surprised by this. Both Mobilicity and Wind didn’t make a significant impact on the Big 3. They can’t compete with them. So they said they will sell their company after 5 years under CRTC rules, they have to be in business for 5 years before they can sell. My guess, Rogers or Bell will buy Wind.

  • Dula714

    I do not care who buys what, as long as they offer really decent pricing. For example, Fido, Koodo and Virgin offer some great deals, I wonder why their parent companies cannot offer similar pricing and packages.

  • abc123

    There is no hope for the Canadian wireless industry. The big 3 have a death grip that cannot be undone.

    The only way competition will flourish is to weaken the incumbents. There should be legislation stating that no wireless company can hold on to more than 3 of the most common bands used in consumer cellular devices. If the most common are 800, PCS, AWS, and LTE, then Rogers, for example, would not be able to bid on the LTE spectrum until they release one of the other 3 (800, PCS, or AWS). When they release it, it should go back to the government for auction.

    The problem with Canada is that there isn’t enough spectrum to go around to the new entrants because it’s already been hoarded by the incumbents. The incumbents have so much financial power and market share that nobody in the world has the stomach to compete for these resources.

  • jime

    whatever happen to capitalism? all you people complaining, give your heads a shake. what about the 7+ million TELUS/Koodo subscribers, i guess they don’t matter?

    • Zany

      If we lived in a pure capitalistic society where governments were completely hands off, we would be screwed. There would be no health care from the government and once several companies formed an oligopoly in that sector, you can bet your bottom dollar that a needle for the flu would cost you $2,000 or more.

      Regulations are put in place to protect the consumer and it is so obvious that the Big 3 collude and participate in price fixing (e.g: Rogers comes out with their 6GB data plan for $30, followed by Bell the next day and then Telus within a few hours, same thing when they drop the price on a plan and the other 2 follow suit within 24 hours) Everybody laughs but yet there doesn’t seem to be anything that we can do about it.

      As for the 7+ million subscribers, just because the majority of people are doing something, doesn’t make them well informed. Look at how many people still think that the 9//11 terrorists entered from Canada and that Saddam has WMDs. Ignorance is not a defence.

  • Anonymous501

    If incumbents acquire all the spectrum, you won’t be able to reverse that. If the smaller players have spectrum I’d like to see the CRTC prevent its transfer to a big player. If they don’t that spectrum is lost forever, and you’ll never get a new player that can get spectrum back.

    Did the wind/mobilicity get some kind preferential treatment on acquiring their spectrum during that auction. It seems kind of silly to have it absorbed like that.

  • Thomas C. Riddell

    IF Any of Big 3 get Mobilicity Wind would only 1 Standing I am on 600,000 on Wind
    and would never go anyone else . I hoping T-Mobile buys wind

    • Kate SI

      Me too! It would be awesome if T-mobile bought Wind. Their own towers would actually work in some areas around lake Ontario. It would be a smart move. But someone said that Canada is blocking foreign companies from buying.

  • Conception

    The only thing I want to know is that if Mobilicity gets bought out, what happens to my contract and kickass plan with Mobilicity? Does Telus have to honor that? Or can they dissolve my contract and screw me? Inquiring minds want to know.

    • First!

      You have no “contract” with Mobilicity, and Telus does not have to honor this non-contract. They want Mobilicity for spectrum, not for it’s 250,000 subscribers, who pay next to nothing (in Telus’ eyes) for unlimited everything.

      Telus will do their best to force most of the subscribers out, before they shut down Mobilicity, and re-purpose Mobilicity’s spectrum for their own use (most likely for LTE).

      In short, no, your “contract” will not be honored. Telus is a well-protected, oligopolistic, cozy Canadian telecommunications business, not your friend.

    • Conception

      Well then, what do you term the “plan” that I pay for each month and that Mobilicity provides me for my money? It is an agreement and in legal terms a contract of service that they must give me as long as I pay them. If they’re bought out, the company buying them has two choices, honor the existing plan or change the terms of the plan. If they change the terms of the plan without my OK or even change the prices up or down, they are violating the agreement that I had in place and requires my input. This will be the case for every current subscriber. So we Mobi folks would like some input on what’s going to happen to us. I don’t mind going to Wind if I must.

  • Janika

    I wouldn’t mind if Vodafone, Orange or T-Mobile came in here and took over Mobilicity, as long as they don’t become part of Robelus. If Wind Mobile goes down or get purchased by the big, nasty 3, We’re back in the “dark ages of Canadian ripoff frenzy, without any competition.

  • thisismysmartphone.tumblr.com

    Testing the Disqus commenting

  • First!

    I has been 4 years, not 5.

    And I do not blame them for “giving up”. The odds were against them since their conception. It was costly to enter, build a network from scratch, then compete in an environment that is bought and owned by the Big 3. It was not a fair battle, but at least they have tried, and awoken quite a few Canadians to the fact that the Big 3 have been gouging us for decades.

    Caller ID and Voicemail are now standard on most, if not all, Big 3 plans, and the cancellation fees on new contract more or less amount to the phone subsidy. Most plans now come with an adequate amount of minutes.

    Wind and Mobilicity have made a dent. I just hope that things won’t revert back to the dark ages once Wind and Mobilicity are bought. I think that most of our butts still hurt from years earlier…

    • LeafsFanGirl

      Sorry, my mistake. If Telus does buy Mobilicity, it will be 5 years by that time. A takeover like his takes time. It won’t happen overnight. I just hope Mobi and Wind merge. They will have over a million subscribers. And my hope is the CRTC will not allow the Big 3 to snatch them up.

  • Zany

    So I see, because they would be at ONLY at 30% margin, that makes it okay for them to treat us like dirt and we are not supposed to be able to complain about it. Okay. If they want to fall in line the world averages, they should go to a 2.5 year plan + drop the price slightly OR they could simply reduce the prices for the 3 year plan to something more in line with the world averages.

    For Arshad, people are allowed to compain about this just as you have the right not to read this forum. If you know that it’s going to annoy you, why do you read? People are fed up with paying $100/month for a plan while their buddy pays $35/month for the same quality of service (in my city anyways there is no difference in quality). Also, this is probably the only website that covers all Canadian mobile news. People would go to Rogers failed experiment called (Redboard) but they learned that when you censor people after you ask them a question, people tend to not come back.

    I actually just went over there ti Redboard to check it out and while their April Fools joke was a bit lame (Google glass in a Roger Toque), I did find the language they used quite ironic:

    “The Rogers Toque essentially displays exactly what you would see in front of you except it does it on the wool toque that covers your eyes and prevents you from seeing exactly what you would have seen if there weren’t wool in front of your eyes,” Ms. Foosdhay explained.

    Yup, Rogers and the big three are very good at doing that. Maybe you already have this toque.

  • Zany

    Oh one more thing. If it weren’t for people like us complaining and willing to pay the $300 fees to break out contracts with the Big three and take a chance on the mini, you would still be paying $150/month for peanuts. All the ‘great and revolutionary’ deals that the big 3 are offering are a direct result of the mini 3 putting pressure on them by putting out plans that people can afford.

    Unlimited data, unlimited text, unlimited texting and 24 hour unlimited Canada wide calling – Yeah, you have us complainers to blame for that. Sorry for standing up and speaking our minds.

  • Guyyyyyy

    mobilicity + wind would equal huuuuuuuge competition for the big 3. i think that is the best option for us consumers, don’t ya think?

  • Goran Mihajlovic

    Hmm…can’t tell if blinded by ignorance or an open Big 3 apologist….

    Yes, let’s discuss this “unique” situation that is Canada, shall we? Yes, we have 34 million people, Yes, Canada is the second largest country by land in the world. It must cost a fortune to cover 10 million square kilometres. It must be so expensive for a company with fewer than 10 million subs to acquire the funding to do this. No wonder we alone*** have 3 year contracts and also pay one of the highest rates . I mean, just look at Rogers’s, or Bells’s, or Telus’s coverage map! All that network colour is just so mas-oh, you mean to tell me that they cover 95-98% of the Canadian population and 90% of our population is within 200km of the American border? Hmm…only 5% of Quebec’s landmass is covered with a wireless network? 10% of Ontario? A quarter of Newfoundland? A third of Manitoba and Saskatchewan? Barely any of the Territories? A quarter of BC? Why, if I didn’t know any better, I’d say that, at most, 15% of Canada’s landmass was covered by a wireless network, which means that the population density that the Big 3 have to deal with is approximately 1/4th that of France, or 40% of Spain.

    Yes, let’s discuss Verizon. This company is in a market of 305 million people, with a significant population density, and yet its profit margin is 40%. Rogers just posted 48%. Telus and Bell are within a couple percentage points higher or lower. A few years back, 50-53% wasn’t uncommon. Hmm…something seems off here. Canada is a unique case with so much land and so few people. Why do the Big 3 post profit margins that the American Big 4 would only dream of? Unless, no! It can’t be! They have been lying to try and justify the massive price gouging that they collectively do? No, not a corporation! Corporations would never do that! Say it ain’t so! >_>

    At the last CRTC hearings, the Big 3 explained that because they pay 15-20% more for phones (lower bulk purchases, tariffs, etc) that they need 3 year contracts. What’s 24 times 1.15? 27ish months? Or 199 times 1.15? 230ish dollars? I’d pay an extra 20-30 bucks to have 2 year contracts. OR! Or, now, hear me out on this, it’s a crazy idea: maybe the Big 3 could accept lower profit margins. Maybe 45% or even, *cringe* 40%? Dear God it’s almost too much to bear! A measly 40% profit margin! There is no “if” they were making that much profit; it’s in their publicly announced quarterly financial statements. So please don’t try to be purposely ignorant to give them an excuse to charge so bloody much.

    Sorry about the rant[,] but it’s just so repetitive and idiotic[,] at this point[,] to hear the same complaints over and over again.

    ***Russia has a similar population density and its population is spread out similarly, with the large majority being in a small % of its total landmass, and there are no 3 year contracts, and prices are lower than in Canada, even taking into account purchasing power parity.