Lively spectrum auction turns regional

If it was more wireless competition the government was looking for, it was more wireless competition it got at least so far.

The government's sale of public airwaves, whichis likely toresult in new cellphone carriers, ended its second week with more than $3.1 billion raised so far in what is turning out to be a hotly contested auction.

In November, the government ruled that cellphone prices were too high in Canada, so it reserved about 40 per cent of additional spectrum being auctioned fornew cellphonecarriers. Incumbent providers Rogers Communications Inc., Bell Canada Inc. and Telus Corp. are unable to bid on this block of spectrum, but the remaining 60 per cent is open to all comers.

After 34 rounds of bidding, Quebecor Inc. led all potential new carriers with high bids on 27 of the 292 licences up for auction. The Montreal-based company seemed to be concentrating most of its biddingin Quebec, but also on Friday held the high bid on the one Toronto licence reserved for newcomers. Bidding is expected to continue for weeks.

Calgary-based Shaw Communications Inc. continued to hold the second-most high bids of potential new entrants, with 25, centred mostly on Western Canada.

Halifax-based Bragg Communications, which runs cable provider Eastlink, came alive in bidding this week after laying low most of the first week. As of Friday, the company held 21 high bids, mostly in Eastern Canada.

Globalive surprises

Globalive Communications Inc., which sells phone and internet services across the country under the Yak brand, has turned out to be the surprise of the auction. Globalive, which is backed by Egypt-based Weather Investmentsand Iceland-based Novator, held 16 high bids on many of the country's large markets as of Friday.

If the auction were now ended,the relatively small, private Toronto-based companywould be on the hook for almost $500 million in fees, which has prompted questions about how much funding it is receiving from its foreign partners and whether or notit will qualify as Canadian owned after bidding closes. Regulations preventforeign companiesfromowning the majority of a Canadian telecommunications company.

Industry analysts said it is possible to get around those restrictions through a combination of debt and an ownership stake. Globalive could end up owing Weather and Novator 80 per cent of what it paid for its spectrum in exchange for a 20-per-cent ownership stake, or some variation thereof, for example.

"There are ways to do it," said telecommunications analyst Mark Goldberg.

As the second week of bidding wore on, it broke down into regional patterns, as most analysts had expected. Before the auction, Quebecor, Globalive and Winnipeg-based MTS Allstream Inc. had their eyes on a national network. A bidding consortium MTS had set up fell apart just before the auction, leaving the company thus far bidding mainly in its home province of Manitoba.

Telus continued to lead incumbent carriers with 54 high bids across the country as of Friday. Rogers and Bell came second and third with 51 and 44 high bids respectively, also broadly acrossCanada.

The auction has yet to enter the second of its three phases and is likely to last another few weeks.