Wirelessnorth.ca

“oppy69″ writes:

I heard on Business News Network that Globalive was pulling out of the auction; anybody hear this? Is that possible at this stage of the game without severe financial penalties

The WirelessNorth.ca magic eightball says “signs point to no”. Globalive’s own CEO Anthony Lacavera had even stronger words, from the National Post via the Windsor Star [Rogers boosted by rumours of Globalive ditching spectrum auction]:

…any rumours suggesting his company would pull out of the auction after committing more than $423-million in an attempt to become Canada’s fourth national carrier are categorically false.

“We are absolutely not exiting the auction, we are fully in the auction,” said Mr. Lacavera. “It’s an extremely low probability at this point that we wouldn’t have national coverage with the exception of Quebec.”

As to the second question, if Globalive exited the auction today they would face $10,000 for each bid withdrawal 28 licences x 10k = $280,000. Which isn’t too much compared to the 443 Million they are in for already. Globalive would also be liable for any difference between their currently standing high bids and what those licenses ultimately sell for if bought up by other bidders (up to the full 443Million if no other new entrant stepped up).

If you look at the recent activity it’s highly unlikely that Globalive would choose now to back out. 95% of spectrum has been sorted out now for nearly two hundred rounds.

If anything, what explains the recent quibbling over small licenses is a quirk in the governments spectrum rules for “national new entrants”. National new entrants gain an extra 5 years of mandated roaming on incumbent networks IF they meet certain 5year rollout requirements of their own and, if they cover some spectrum over *all* of Canada. National new entrants are defined as:

“A new entrant that has acquired licences for all Tier 2 or Tier 3 service areas, or a combination of Tier 2 and Tier 3 service areas, covering all of Canada in the AWS or PCS bands. This definition includes a group of new entrants collectively holding all Tier 2 or Tier 3 service areas, or a combination of Tier 2 and Tier 3 service areas, covering all of Canada in the AWS or PCS bands and cooperating to provide a national service.”

So new entrants can team up to form a national service, as long as together they can stitch up coverage across the whole country. This of course creates an added (and unitentional?) incentive for regional players to monopolize any local swath of spectrum to enhance their negotiating position in any future hook-up. This in turn helps explain where the 4.2 billion came from and bickering for Moose Jaw, Coburg etc.

At the least, expect Globalive and Quebecor to be partnering nationally when all is said and done.

So Rogers stock was up an astonishing 11% today, partly on the rumour. The market is putting a heavy weight on the outcome of these auctions. But note also that following the wild swings of the last few days, a lot of stocks were way up on the TSE today. Tomorrow is another day.