Private equity lines up for Canadian wireless spectrum

Three heavy-hitting private equity- and venture-backed syndicates have made deposits of more than $100m for an upcoming spectrum auction.

The Advanced Wireless Services spectrum auction in Canada, for which the list of qualified bidders is now complete, counts three private equity- and venture-backed groups among its 27 bidders. Each group is anchored by a Canadian investor that would be the spectrum’s majority stake holder, in line with Canadian law prohibiting foreign investors from owning more than 46 percent of telecom companies.

One consortium consists of Canadian private equity firm Novacap and US venture firms Columbia Capital, M/C Venture Partners, Council Tree Communications/Catalyst, Battery Ventures, Highland Capital Partners and Charles River. The group is co-led by M/C and Columbia and has made a C$154 million ($153.2; €98 million) deposit.

“We’ve put ourselves in a position to win licenses and build a legitimate business,” said M/C partner Salvatore Tirabassi. He stressed that bidders must “have enough scale to be relevant” in spectrum auctions, and noted that only a handful of bidders made deposits of more than $100 million. Using $100 million as a guideline, all three private equity-backed bids have the potential to be “relevant”.

Canada has recognised that they have a fairly uncompetitive market.

Salvatore Tirabassi

Data & Audio-Visual Enterprises Wireless, backed by Canadian businessman John Bitove, New York-based private investment firm Quadrangle Group and Microsoft co-founder Paul Allen’s private equity firm Vulcan Capital, has deposited C$106 million.

And as PEO previously reported in March, a consortium made up of Canadian company Manitoba Telecom Services, the Canada Pension Plan Investment Board and The Blackstone Group made a C$340 million deposit.

Of the 30 member countries of the Organisation for Economic Co-operation and Development, Canada ranks last in wireless penetration, said Tirabassi. He said it is an “attractive market with an auction structure that makes it very interesting for guys like us”.

“Canada has recognised that they have a fairly uncompetitive market,” said Tirabassi. The country is near completely dominated by three wireless companies: Rogers, Telus and BCE.

The auction, to be conducted beginning 27 May, is intended to create increased competition in the Canadian wireless sector by auctioning off 105 megahertz of spectrum, with 40 megahertz set aside for “new entrants”.

“New entrants” are effectively all bidders aside from Rogers, Telus and BCE, said Tirabassi, who added the success of bidders will be determined entirely by size of financial commitment.