Verizon Communications has made an offer worth CAD700 million ($670 million) for Canada’s Wind Mobile and started takeover talks with Mobilicity, another struggling Canadian wireless start-up, according to The Globe and Mail.
Last week, Verizon Communications’ chief financial officer, Fran Shammo, confirmed that the US operator was looking at entering the Canadian market after The Globe and Mail reported it was in talks with Wind. Shammo described those discussions as “dipping our toe in the water”.
Citing unnamed sources, however, the Canadian newspaper says Verizon has now come up with a firm offer for Wind and entered talks with rival Mobilicity.
Canada’s government has tried to stimulate foreign investment in the country’s mobile market, wanting to create a viable fourth operator – nationwide – to challenge heavyweights Bell Canada, Rogers and Telus.
Last year, it ruled that telecom carriers could have full foreign ownership if they had less than a 10 per cent market share, a change in law that Verizon is hoping to take advantage of.
“We believe Verizon has several advantages it could use to become successful in the marketplace, such as its advantage with US roaming, capital strength and, importantly, its handset-buying power,” Desjardins analyst Maher Yaghi told The Globe and Mail, while also noting recent changes by the country’s telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC).
“Given the recent change by the CRTC to limit postpaid contracts to two years, the handset subsidy has become a more important factor in the consumer’s decision framework and Verizon’s handset-buying power allows it to be more aggressive in subsidising handsets,” he said.
Verizon’s moves on the Canadian market follows a decision by Orascom Telecom, majority-owned by Amsterdam-headquartered VimpelCom, to withdraw its bid to control of Wind Mobile.
The country’s authorities are likely to welcome Verizon since Canada’s mobile market is still dominated by Rogers Wireless (9.38 million subscribers), Telus Mobility (7.7 million) and Bell Mobility (7.67 million), according to data from GSMA Intelligence.
The country’s start-ups lag far behind. Wind has around 600,000 subscribers and Mobilicity has 335,000. Public Mobile, another struggling Canadian start-up, has 384,000 subscribers.