Rogers CEO says a fourth Canadian wireless carrier doesn’t make sense

Big U.S. carriers like Verizon shouldn’t be allowed to buy new, struggling Canadian wireless companies at discount prices while the big domestic carriers are barred from the same opportunity, the CEO of Rogers Communications says.

Rogers welcomes competition but wants a level playing field, chief executive officer Nadir Mohamed told analysts after the Toronto-based wireless, cable and media company (TSX:RCI.B) released its second-quarter financial results.

“What we’re absolutely against is a tilted or stacked playing field where you have a massive incumbent U.S. carrier that would be given favourable treatment, and frankly better treatment than Canadian incumbents,” Mohamed said Wednesday.

There have been reports that Verizon wants to enter the Canadian market and is planning to buy new carrier Wind Mobile while also in talks with Mobilicity — two of the new generation of wireless carriers competing with Rogers, Bell and Telus.

The federal government blocked major carrier Telus (TSX:T) from buying Mobilicity since the smaller company’s spectrum licence doesn’t expire until 2014.

The industry minister at the time, Christian Paradis, made it clear in June that the federal government wants to increase competition in the wireless market and aims to create the conditions necessary to have a fourth national carrier.

James Moore took over as industry minister in the July 15 cabinet shuffle, while Paradis has been reassigned to be minister of international development and minister for La Francophonie.

On the whole, however, the Harper government has repeatedly said it favours increasing competition to provide consumers with better prices and more innovation.

Verizon has almost 100 million wireless customers in the United States. By comparison, Rogers is Canada’s largest wireless provider with about 10 million customers.

The federal government has said it wants to have four wireless carriers in each of Canada’s regions. But Mohamed says that four wireless carriers have never been sustainable in geographically large country like Canada and that globally, the norm is three wireless carriers in one country.

“I’ve never seen how a four-player market can work in a country like Canada,” Mohamed said, noting Canada’s “geographic expanse.”

“I’ve never thought of it as a sustainable model. If you think of what has happened in Canada consistently over a period of time, it has been proven out that in this country it’s difficult enough, frankly, to work with three players.”

Mohamed said if Verizon were to enter Canada’s wireless market, large urban markets would benefit more than other markets.

In its financial results released Wednesday, Rogers Communications Inc. (TSX:RCI.B) reported $497 million in adjusted net income in the second quarter, a four per cent increase from last year and better than analysts’ consensus estimate.

Analysts had expected the Toronto-based wireless, cable and media company to have $491.95 million of adjusted net income.

Net income was also higher than expected, at $532 million or 93 cents per share — $22 million above the estimate and up from $413 million or 77 cents per share a year earlier. Revenue grew three per cent to $3.2 billion.

Rogers said it had 98,000 net new post-paid wireless subscribers versus 87,000 year-over-year. Those were customers who are usually on lucrative three-year smartphone contracts.

The company said 72 per cent of its wireless customers now have smartphones compared with 63 per cent in the same quarter last year.