Regional partners seen as best bet for Videotron’s wireless spectrum buy

MONTREAL – Quebec’s dominant cable TV and Internet provider may have scooped up enough wireless capacity in the latest spectrum auction to take on Canada’s three big carriers, but analysts say Videotron is more likely to partner with regional telecoms to expand networks and services.

Videotron has gathered about 500,000 wireless customers in Quebec since it launched in 2010 and, on Wednesday, it was announced that its parent company, Quebecor, spent $233 million in auction for spectrum licences not only in Quebec, but also Ontario, Alberta and British Columbia.

Industry Minister James Moore said he believed that Videotron had the capacity to become the fourth national wireless company that Ottawa wants to improve competition and reduce costs to consumers.

But analysts say Videotron’s low profile outside of Quebec, and the high cost of muscling onto the national stage to compete with Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T), would make Videotron an unlikely competitior.

“Videotron, itself, doesn’t have cachet once you go beyond Quebec,” telecom analyst Iain Grant said Thursday.

He sees the company partnering with players such as Wind Mobile, which needs more spectrum to expand its cellphone network but couldn’t afford to participate in the auction. Wind has more than 650,000 subscribers in Ontario, Alberta and British Columbia but was put up for sale its owner.

It could also join with Eastlink, which offers cable service in parts of Ontario, Alberta and British Columbia, to build up its cellphone service in Atlantic Canada. Videotron also could strike a similar deal with Calgary-based Shaw Communications or Quebec-based Cogeco, said Grant, managing director of the SeaBoard Group.

Robert Depatie, chief executive of Quebecor Media and Videotron, said on Wednesday that the company now was well-equipped to develop its network.

“Given the way the auction unfolded, Quebecor Media could not pass up the opportunity to invest in licences of such great intrinsic value in the rest of Canada,” Depatie said.

“We now have a number of options available to us to maximize the value of our investment.”

The auction brought in a record $5.27 billion for Ottawa, with Rogers being the biggest bidder for the 20-year licences. It spent $3.29 billion for 22 licences across the country, except in the Yukon, Northwest Territories d Nunavut.

Telus (TSX:T) spent just over $1.14 billion for 30 licences, while Bell spent (TSX:BCE) $565.7 million for 31 licences.

In total, the auction saw some 10 bidders participate, with eight of them winning licences.